Businesses and wealthy people ‘handed £36bn tax cuts under Rishi Sunak’
Businesses and the wealthy received almost £40bn in tax cuts while Rishi Sunak was chancellor, leaving others footing the bill for Britain’s recovery from the pandemic in the midst of a cost of living crisis, according to new analysis.
Mr Sunak rejected calls for an emergency budget to help struggling families earlier this week after former prime minister Gordon Brown urged the government to announce more support before a “financial timebomb” of rising bills in October “pushes millions over the edge”.
On Monday, the leadership hopeful launched a fresh attack on his rival Liz Truss’s plan for tax cuts in an emergency Budget, describing it as a “big bung” for large businesses and the better-off which would do little to help those most in need.
But a review of tax “winners and losers” across every Budget that took place while Mr Johnson and Mr Sunak were in Downing Street found that the Treasury had favoured tax breaks for business over help for individuals and families.
Tax Justice UK calculated that the government handed at least £35.8bn to businesses in tax cuts, compared to plans in place when Theresa May’s government came to an end.
While households did benefit from an array of support from the Treasury during the pandemic, the new analysis shows that this has largely been “paid back” already through a hike in national insurance contributions and a freezing of income tax bands which means ordinary workers are paying billions more in tax just as the cost of living surges.
Meanwhile, Mr Sunak ignored calls not to reverse a £20-per-week uplift in universal credit that slashed the incomes of millions of the least well-off.
It came as a separate analysis commissioned by Mr Brown found that the least well-off families will be up to £1,600 worse off this year, even after existing government support of up to £1,200 per household has been paid out.
Official figures show a growing gulf between top earners, including bankers and insurance brokers, who have been able to bargain for inflation-busting pay rises while those on the lowest incomes have seen prices far outpace wage growth.
Tax Justice UK’s report shows that Ms Sunak also handed a £2.2bn net reduction in taxes on wealth, primarily through a heavily criticised stamp duty holiday which cost £5bn, while primarily helping well-off homeowners. The move also helped to inflate the UK’s property bubble, pushing prices even further out of reach for first-time buyers.
Tom Peters, head of advocacy at Tax Justice UK, said the policy was a “straightforward bung to homeowners”.
Taxation and spending have taken centre stage during the often ill-tempered contest between Tory leadership hopefuls Ms Truss and Mr Sunak.
Ms Truss has argued that tax cuts are the best way to solve Britain’s economic problems. She has pledged to immediately reverse a rise in national insurance brought in by Mr Sunak and to cancel a planned increase in the tax on company profits, despite corporations announcing record jumps in earnings this year, and warnings from economists that the move would further fuel rampant rises in the cost of living.
The leadership frontrunner has laid out plans to fund tax cuts through more government borrowing, a plan which has been denounced by Mr Sunak, as well as Labour leader Sir Keir Starmer, who called it “fairytale economics”.
Mr Sunak, meanwhile, has sought to present himself as a prudent chancellor who will “level with” the public about the need for higher taxes.
This week he unveiled a “three-part plan” to ease the pain of soaring bills, which consisted of “support for the most vulnerable, support for pensioners and some support for everyone”. Writing for The Times, Mr Sunak said his plan could involve support in the form of winter and cold weather payments, and that all households could expect a roughly £200 boost from his VAT reduction on energy bills.
The second part of the plan involves identifying and targeting the scale of support needed, with expectations that soaring energy costs could see households £400 to £500 worse off than when Mr Sunak announced his previous support package in May.
Thirdly, Mr Sunak said he would “drive a programme to identify savings across Whitehall” in order to pay for his support scheme, which The Times said would cost around £10bn.
Tax Justice UK acting executive director, Paul Hebden, said: “Tax is about political choices, and our analysis shows that Boris Johnson and Rishi Sunak gave tens of billions in handouts to business.
“The idea among some of the Conservative leadership candidates that the planned 2023 corporation tax increase should be reversed is perverse, given that working people are currently the only ones on the hook for the costs of covid recovery.”
Mr Sunak became known as a big-spending chancellor after borrowing more than £300bn to pay for support during the pandemic. His tax breaks for business received less attention. A “super-deduction” handed companies 120 per cent tax relief on capital investment in the UK.
Critics argued that the policy, which cost the Treasury £17bn, subsidised investments that large companies had already been planning for years.
It has not served to supercharge business investment, which has grown slowly since the Brexit referendum. Nor has it delivered stellar economic growth, with the UK heading towards a recession this year, driven largely by a massive surge in energy prices.
Other tax breaks included cutting the tax on domestic flights in the UK, despite government promises to reduce the UK’s net carbon emissions to zero.
Mr Sunak also announce a windfall tax on oil and gas company profits but at the same time gave a tax break for investing in new fossil fuel projects.
Other controversial and expensive tax policies included a 5p cut in fuel duty, which followed two years of freezes. That cost the Treasury £4.5bn but made little impact in the face of record-high fuel prices.
Tom Peters, head of advocacy at Tax Justice UK, explained: “Fuel duty cuts disproportionately help wealthier households who are more likely to have a car and to drive more miles.
“You could also argue that it adds to inflation because people will drive more than they would have done if duty hadn’t been cut.”