Latest Public Sector News

14.03.16

Government tax cuts are ‘off target’ and benefit the richest most

New tax cuts are not on target and will benefit already wealthy families the most, think-tank The Resolution Foundation has warned.

The government has committed to raising the personal tax allowance (PTA) to £12,500 and the Higher Rate Tax threshold (HRT) to £50,000 by the end of the Parliament. But the Resolution Foundation says that the HRT has already fallen behind the trajectory required to take it to £50,000 and will cost £2bn to keep on track over the next two years.

The Foundation also says that less than one in seven employees will benefit from the tax cut and over three-quarters of benefits will go to the richest fifth of households, following a recent report showing that the government’s benefits reforms will also cause the greatest loss to the poorest households.

Torsten Bell, director of the Resolution Foundation, said: “The priority next week should be supporting low and middle income working families, instead of going down this route of expensive and poorly targeted tax cuts.”

The Foundation said that the government should focus on helping lower income families in this week’s Budget instead, by reversing the benefits reforms and increasing the National Insurance threshold.

PSE contacted the Treasury for comment but they did not respond at the time of publication.

PSE will have full coverage of the Budget as it happens on Wednesday.

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