Tory candidates’ tax cuts: a boost for the wealthy, and a drag for the rest of us
An outsider listening to the debate between Tory leadership contenders might think that the only problem the country is facing is overly burdensome taxes. Never mind the soaring temperatures, a symptom of the climate emergency, or average ambulance waits in England of 51 minutes compared with an 18-minute target. On these topics, those vying to be our next prime minister have had much less to say.
Pledged policies have included cancelling the planned rise in corporation tax or reducing the rate even further; raising income tax thresholds; and more rapid cuts to the basic rate of income tax. With the exception of Rishi Sunak, who has said he would wait before cutting taxes further, the mood music is cutting taxes from day one. We are told this is the best way to get the UK’s economy growing strongly again, therefore putting the country’s finances on a sustainable footing. Tax cuts are also put forward as a way to put money in people’s pockets to help with the cost of living crisis.
But there are several gaping holes in this approach that mean it’s unlikely to survive contact with the UK’s economic reality. Taking the cost of living crisis first, the tax cuts on the table are an incredibly inefficient way of getting money to those who need it. The government has already scheduled a penny cut to the basic rate of income tax, which all candidates support at a minimum. But IPPR analysis shows that this costs the exchequer £5bn, more than half of which will go to the richest fifth of households. It would be much more effective to boost the support offered to those on low incomes through the benefits system.
What about the Conservative belief that taxes hold back economic growth? Inconveniently, there’s little evidence that the
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