The new government of the United Kingdom eliminates the punitive maximum rate, but does not cut the average rate squeezed

The new government of the United Kingdom eliminates the punitive maximum rate, but does not cut the average rate squeezed

The new British government has confirmed a massive energy subsidy program and widespread deregulation and tax reform for business, but has done nothing to address long-term structural problems with tax codes increasingly affecting the class. half squeezed.

In a so-called mini-budget statement to the House of Commons on Friday morning, the UK’s new chancellor, Kwasi Kwarteng, announced a series of handouts, law changes and tax cuts. The changes are part of what the new government of Liz Truss calls a growth strategy.

Some recent tax hikes announced by the former Boris Johnson have simply been cancelled, while other taxes have been scrapped altogether. While the measures received a sometimes rancorous reception in the House of Commons debating chamber from the opposition, Kwarteng said that in many cases the tax cuts simply returned the country to a point where it had been at. recent memory.

Chancellor of the Exchequer, Kwasi Kwarteng, delivers his mini-budget to the House of Commons in London. Photo date: Friday, September 23, 2022. (Photo by House of Commons/PA Images via Getty Images)

As the Associated Press reports:

Treasury chief Kwasi Kwarteng announced in his “mini-budget” on Friday that he would reverse an increase in national insurance taxes introduced by the previous administration.

Kwarteng’s predecessor, Rishi Sunak, imposed the increase to pay for social care and a backlog of public health service.

Kwarteng, in his statement to lawmakers in Parliament, also announced that income tax rates will fall next year as part of the government’s measures to boost the economy.

One of the most expensive items in the budget was the announcement that the government was going to ‘freeze’ energy prices for the next two years, in other words, subsidize them. With different levels of support that change depending on the recipient and time from now on, in total the booklet is priced at around £60bn ($66.7bn). The less wealthy will receive additional targeted support on top of their bills subsidy, help that will be worth thousands of pounds to their household.

While the scale of this brochure is huge, Kwarteng said the move would reduce “peak inflation” by five percent. In essence, he’s staking a big chunk of government borrowing to ease the economic pain considerably: a big gamble.

However, it is one that Kwarteng says is necessary. He told the Commons: “In the context of a global energy crisis… it is entirely appropriate to use our borrowing powers to fund temporary measures to support families and businesses. That is exactly what we did during the Covid-19 pandemic, a considerable intervention was then and is now. The high price of inaction would have been far greater than these schemes. ”

In addition to hefty energy subsidies for the poorest, the government is also giving businesses and high-income individuals a boost. In a major and widely unforeseen move, the top income tax rate for personal earnings, 45 per cent on £150,000 a year, will be scrapped entirely.

While Labour, of course, have attacked the chancellor for the move as a concession to the rich, in fact the tax was introduced by the Conservatives themselves in 2010, a Cameron-era raid on the rich.

Yes, despite the headline-grabbing moves, tax changes that will actually benefit Britain’s middle class are nowhere to be found. A one percent cut in the base rate from 2023 will barely be felt as inflation rises, and the fiscal drag sees punitive taxes once introduced to hit the very wealthy now routinely hit average US professionals. middle class.

Fiscal drag—in this context, the process of inflation in which wages rise over time, but the fixed tax brackets set by the government are not reviewed regularly, leaving base-rate taxpayers trapped in brackets higher taxes through no fault of their own—is becoming a major factor in the taxes ordinary people pay.

The top tax rate has hardly changed in more than a decade. In fact, except for the change in the ‘tax-free’ personal allowance that everyone receives, this high-rate tax that was intended to be paid by people with particularly high incomes when it was established in the 1980s is now routinely paid by established teachers and other normal professionals. middle-class professions at the same income level today as in 2010.

Leave a Reply

Your email address will not be published.