Jeremy Hunt has hiked taxes in his autumn statement, freezing allowances for 2 further years and cutting the threshold for the 45p top rate.
The decision not to increase the earnings figure at which the 20p and 40p rate kick in will drag many more people into paying tax and into paying more to the Treasury.
But the chancellor said cutting the starting point for the 45p rate – from earnings of £150,000 to £125,140 – would see the wealthiest paying an extra £1,200 each year.
Unveiling £55bn of spending cuts and tax increase, Mr Hunt insisted he was ensuring “those with more contribute more” and that tax hikes would avoid “damaging growth”.
Although the increases were “substantial”, the headline rates of tax would be unchanged – and the per centage of GDP taken in tax would rise by only 1 per cent over five years.
The chancellor also confirmed that £4bn-a-year cuts to overseas aid will continue indefinitely, instead of returning to 0.7 per cent of national income in 2024.
He confirmed the budgets of most Whitehall departments will not be increased in line with rampant inflation – despite those allocations being made when prices were rising by around 3 per cent, not 11 per cent.
But he made an exception for education, announcing it would receive an extra £2.3bn a year, when further cuts were feared.
Tax allowances had already been frozen until 2026, but that will now continue until 2028 – as Mr Hunt seeks “just under half” of his savings from tax.
The cutting of the 45p threshold is a stunning reversal of Kwasi Kwarteng’s decision to axe it altogether in his disastrous mini-budget – something Mr Hunt had already reversed.
“I understand the motivation of my predecessor’s mini-budget and he was correct to identify growth as a priority. But unfunded tax cuts are as risky as unfunded spending,” Mr Hunt told MPs.
“Anyone who says there are easy answers is not being straight with the British people: some argue for spending cuts, but that would not be compatible with high-quality public services.
“Others say savings should be found by increasing taxes, but Conservatives know that high tax economies damage enterprise and erode freedom.
“We want low taxes and sound money. But sound money has to come first because inflation eats away at the pound in people’s pockets even more insidiously than taxes.
“So, with just under half of the £55n consolidation coming from tax, and just over half from spending, this is a balanced plan for stability.”
Kaynak: briturkish.com