So now we know: the benefit freeze is paying for a tax cut for the top 15%

The benefit freeze announced on Monday (saving: £3bn) is paying for a tax cut for the top 15 per cent (cost: £4bn).

The benefit freeze announced on Monday (saving: £3bn) is paying for a tax cut for the top 15 per cent (cost: £4bn)

On Monday, the chancellor George Osborne announced that under another Conservative government there would be a two-year freeze on benefits paid to working age people. The freeze will come in in April 2016 and comes on the back of a 1 per cent cap that was announced in 2012.

The freeze (in reality a cut) will hit 10m households. Half of those hit by the policy are in work.

In other words, George Osborne will make many hardworking people worse off, with families with children set to lose up to £490 a year in child benefit and tax credits.

Contrast this with today, where prime minister David Cameron announced that the threshold at which people will start to pay the top rate of tax will rise from £41,900 to £50,000.

The 40p tax rate is currently only paid by the top 15 per cent of earners, yet the move is being billed by the Conservatives as a boost to those on ‘middle incomes’.

This means that (and it probably doesn’t take me to tell you this) the Tories plan to make 10 million households poorer, saving £3bn, to fund a tax cut for the top 15 per cent of the population (the idea of raising the top rate to £50,000 was first mooted by Tory right-wingers Priti Patel and Kwasi Kwarteng in 2012. The cost? £4 billion).

The benefit freeze announced on Monday (saving: £3bn) will hit the poorest third in society in order to pay for a tax cut for the top fifth (cost: £4bn).

During his speech Cameron also pledged to raise the tax-free personal allowance from £10,500 to £12,500. However as Left Foot Forward has previously noted, the greatest percentage change in net income from increases in the the personal tax free allowance are seen by those at the upper end of the income scale.

Analysis carried out for Left Foot Forward in 2010 found that some three million households in the poorest quarter of the household income distribution would not benefit from raising the personal allowance to £10,000. Raising the income tax threshold can, after all, only benefit those who earn enough money to pay tax.

The latest tax and benefit proposals from the Conservatives are a naked redistribution of wealth from the bottom to the top. Otherwise known as class war.

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20 Responses to “So now we know: the benefit freeze is paying for a tax cut for the top 15%”

  1. Spartacus

    Correlation is not causation: announced welfare savings are to reduce the deficit in near term and not to pay for a tax cut proposed for 2018 and only with surplus budget. Simple fact that Michael Gove made very clear on BBC News immediately after the speech.

    You’re argument would have been stronger if you’d just weighed up the idealogical arguments of wanting to both cut welfare and taxes (Conservative) vs. raise welfare and taxes (Labour).

    Regards,

  2. Gary Scott

    Again, the poorest hit hardest. Even tax cuts don’t benefit the worst off; more income but that means less tax credit entitlement which means overall leaves them no better off while utilities, food and housing costs rise. Add to this the cuts in tax credits and you find them worse off. Of course, if they’re below the NI threshold this means no employer contribution. Employers save money, employees now have to work for less and this pushes wages down overall. As with Thatcher what we are seeing is a resetting of the labour market. Low wages and the authority/control being with the employer esp as we have so many temp and p/t jobs. Its a buyers market. The Conservatives relish this seeing the ‘invisible hand’ at work whereas it is nothing of the kind, it is government interference causing problems for the population at large. Wages are low and employees depend on cheap imported goods to be able to afford day to day necessities. This then depresses British manufacturing due to goods being too expensive even for home consumption. Thus a Tory created spiral, a ‘race to the bottom’

  3. Godfrey Paul

    Its about time the 40% band was adjusted for inflation. Many people who should be standard rate taxpayers have been drawn into this band which was designed only for the rich.

  4. sarntcrip

    BELIEVING GOVE NOT THE ACTIONS OF THE SANE

  5. Leon Wolfeson

    Completely agree.

    Many of the poorest are facing having to either spend £13.90 per week buying NI contributions or facing having massive gaps in their pension eligibility.

  6. Leon Wolfeson

    Oh yes, this is an ideal time to lower tax on the rich, we’re in…oh wait, this is a terrible time for the economy.

  7. Leon Wolfeson

    There’s little to no evidence Labour are interesting in raising welfare or investing.

    Moreover, afaik Gove lied. Politicians do this, you know.

  8. Cole

    Oh bug surprise: Tory tax cuts for the wealthy, again. Just shows they don’t really care about the deficit. It’s just an opportunity to shrink the state.

  9. Jack

    You think £42k a year is wealthy? You must have very limited horizons. 42k is just over 1.5 times average earnings. If you’re a graduate aged, 41, twenty years into a career, it is a modest achievement. Then factor in a wife and three kids.

    David Beckham is wealthy. Alan Sugar is wealthy. A middle aged guy earning £42k is not wealthy.

  10. Florris

    Yes, £42k is wealthy. Quite wealthy.

  11. Guest

    Top 15%. Moreover, graduates here have a very modest premium.
    The reality is that middle class families are forced into two-earner for a reason.

  12. Guest

    (And that reason is neoliberalism)

  13. jack

    what’s neoliberalism?

  14. Peter Risdon

    The trade off is actually with a raised tax threshold. You’re not usually this misleading, James.

  15. remarx

    This move is disgusting!

    Another callous cut to the living standards of the working class to fund the rich. Please GOD let these smug, out of touch Hooray Henry’s be brought down in May. Their total disregard for the low paid must now be obvious.

    Why should these Tory *astards concern themselves if the poorer in society get poorer? They have plenty of money. Why concern themselves with the NHS? They can go to their private GP’s and private hospitals when they are sick. In particular, another pop at those ‘scum’ who claim benefits must always be good for a laugh behind their privileged doors.

    Every worker who can MUST vote at the next election. Not voting may let these cosseted overlords back in for another four years; Lord protect us!

  16. remarx

    Statistics show that the average wage in the UK is £26,500 – what a lot of twaddle! Most workers – in reality – earn about half of that.

    According to HM Treasury figures for 2014, families with two adults and one child in the bottom decile of Median Gross Earnings bring in£15,300, whilst the top decile earn £113, 400. Your £ 42, 000 comes into the sixth decile, so yes, you are quite wealthy.

    Also, don’t forget these figures are the median.

  17. Cole

    You’re obviously living in Daily Telegraph land if you think £42k is sort of average.

  18. Guest

    Some people are aright, jack.

    And they take it as a licence to screw over the poorer to make more cash.

  19. Leon Wolfeson

    “Every worker who can MUST vote at the next election.”

    I will be. Probably spoiling my ballot paper, as Labour have convinced me not be significantly better overall, and with policies I simply cannot lend my name to.

  20. Stephen

    How disgraceful of the media to be taken in by the claim of the income tax changes being aimed at middle earners. Even the rich don’t benefit as much as it seems anyway. Not mentioned above, is that the increase in tax rate will only be implemented in perhaps 5 years time (the details are vague) when much of the increase in allowance is lost anyway due to inflation.

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