Feathering the nests of the wealthy

The Resolution Foundation research shows that the effect of £2bn of income tax cuts and more than £1bn of welfare cuts will add up to a huge transfer of wealth from low- and middle-income households to richer ones. The richest will reap 80% of the rewards from the tax and benefit changes that start to come into effect this week.


David Finch, senior economic analyst at the Resolution Foundation, said: “The overall package amounts to a £1bn net giveaway from the public purse. But the skewed nature of this generosity means that better-off households will receive four-fifths of the gains, while the poorest third of households will be worse off overall.”


A low-income single parent with a baby, earning £17,300 a year, will be £530 worse off, losing £610 from benefit cuts while gaining £80 from tax cuts.

 A middle-income working couple earning £33,500 a year, with three children including a baby, will be £2,500 worse off overall, losing £2,700 from benefit cuts while gaining £160 from tax cuts.

A high-income couple with two children, earning £100,000 a year, will be £480 better off, with no benefit losses and all gains stemming from tax cuts.

Torsten Bell, director of the Resolution Foundation, said : “The rights and wrongs of a relatively small national insurance change for the self-employed have dominated the headlines. But the real tax and benefit debate is about much bigger policy changes being rolled out this week and in the coming years. These amount to unwise giveaways to richer households and unjustifiable takeaways from less-well-off families. The result is higher inequality and a decision to squeeze living standards for low- and middle-income families at a time when rising prices are already outstripping wage growth.