Today’s budget was reportedly a “back-to-work” budget, with policies being pursued in recent days, promising to help parents, people with disabilities and the over-50s return to work.
In reality, however, this budget was back to normal for the Conservative Party – big tax cuts for some of the top earners and billions of taxpayers’ dollars spent subsidizing big corporations.
In thirteen years of Tory austerity, Chancellor after Chancellor has claimed that there is no money for public services and that the country cannot afford to pay key workers any more.
Somehow, however, today’s budget has found the money to offer tax cuts for big corporations and the top earners.
Today’s budget was also about what the chancellor didn’t say, but about what he did.
childcare
Britain has the most expensive childcare in the OECD and it is a testament to the campaign by UNISON and others that the Chancellor used his budget to announce an additional £4 billion investment.
What he failed to mention, however, is that many daycare centers are already struggling to provide the free hours parents are entitled to and many communities are suffering from severe supply shortages.
Crucially, childcare doesn’t come naturally – staff need better pay, not a lower staff-to-child ratio, but the Chancellor said nothing about pay. The downsizing reduces quality, not cost, and will only accelerate the industry’s recruitment and retention crisis.
Tax loopholes for large companies
The Chancellor announced a new system called “Full Capital Expensing” that will allow companies to deduct expenses for things like IT equipment from their taxable profits.
This loophole equates to an average corporate tax cut of £9 billion a year. This means that alongside one of the lowest corporate tax rates in the world, only 10% of companies will actually pay the full tax rate.
This means ordinary taxpayers are giving large companies a £9 billion tax credit.
Another major tax loophole was also left wide open: the government’s failed windfall tax on oil and gas companies remained untouched in today’s budget.
Since the Windfall Tax was announced, big oil and gas companies like Shell and Exxon have reaped record profits and paid out billions to their shareholders and executives – while bills are more than double last year’s levels, despite the energy cap remaining in place for three months.
It doesn’t have to be – windfall taxes in other countries have been far more effective, bringing in billions for the public purse and reducing bills. The Chancellor today missed an opportunity to do the same.
Tax breaks for the better off
One of the most expensive items in today’s budget has been the big tax cuts for high earners who have accumulated significant retirement savings.
For those lucky enough to have over £1.07million in their pension pots, the Chancellor has scrapped the lifetime pension supplement. These policies only help about 8,000 of the wealthiest pensioners but translates into a £1.1bn-a-year tax gift through 2027.
Another group that pays less tax will be among Britain’s top earners. As well as increasing tax credits for the wealthiest pensioners, the Chancellor scrapped lifetime pension credits for those lucky enough to have over £1.07million in their pension pots – helping just 8,000 of the wealthiest pensioners – a huge public Subsidy for those on larger salaries.
Tax increases for everyone else
Meanwhile, the Chancellor failed to mention the taxes that ordinary households will pay. Thanks to the April freeze on tax thresholds, there will be a huge tax increase next month.
Economists call this “fiscal drag” – but in plain language it just means taxpayers of the principle pay £500 more and those with the higher tax rate pay £1000 more.
Over 3 million low-wage workers will be drawn into the tax system at the bottom end, while a further 2.5 million will be affected by the top rates of 40p and 45p.
What is clear is that the cost-of-living crisis has not gone away. The money for pay rises and public services is there – but it’s concentrated at the top while ordinary households continue to struggle with the rising cost of living.
