Friday’s mini-budget is set to fulfill Liz Truss’s campaign pledge to scrap Boris Johnson’s tax hike – designed to save the crisis-hit NHS and adult social care – while also raising fears of future funding cuts. But analysis by the prestigious Institute of Fiscal Studies (IFS) has highlighted the extent to which the move will overwhelmingly be a boost for the wealthiest Britons. The richest tenth of households, earning an average of £108,000, will save £1,800 on their annual tax bill, equivalent to £150 a month, the thinktank says. In stark contrast, the poorest 10 per cent, three million people who earn an average of £12,000, will save just £7.66 – just 63p a month or 14p a week. Households with an average UK income of £31,400 will save around £20 a month – while those with an income of £55,000 will save around £58 a month, almost three times a month. “Reversal of recent NICs [national insurance contributions] The increase would tend to benefit the richest households more than the poorest, even as a share of their income,” said Tom Waters, senior research economist at the IFS. Tony Wilson, director of the Institute for Employment Studies, told The Times the plans were a “fiscal gift to relatively high earners” and risked fueling inflation. “The concern among Bank of England and Treasury officials will be that the move is more inflationary than a more targeted subsidy or tax cut,” he said. The 1.25 per cent national insurance rise was only implemented in April, when it was branded a health and social care levy, but Ms Truss argues that scrapping it can help the UK move forward with growth. It is one of £30bn of measures to benefit the wealthy, including reducing next year’s planned rise in corporation tax from 19 to 25pc. Kwasi Kwarteng, the new chancellor, is also expected to remove the 2014 cap on bankers’ bonuses, even as public sector workers are called on to show pay restraint to keep inflation under control. It could also speed up Rishi Sunak’s plan to cut 1p from the basic income rate, which is expected to come in 2024, in time for that year’s expected general election. The chancellor is also expected to set up 12 special investment zones which could reduce employers’ national insurance contributions for staff employed in the zones. The spending spree has sparked warnings that the Bank of England will raise interest rates further – to curb inflation – and could require the new government to lift its fiscal rules. They are calling for debt to be reduced as a share of national income by 2024, not borrowing for everyday spending.
