UK Budget Assessments
An Inequality Budget Unfit for a Cost-of-Living Crisis
Date Posted: Thursday 29th September 2022
The budget presented by the Chancellor is a gamble on growth through tax cuts at the expense of a major increase in borrowing levels. An almost immediate plummeting of the pound and rise in interest rates will impact families via mortgage costs and eventual defaults, and higher food and other essentials’ prices (including fuel). History shows, and most economists agree, that trickle-down doesn’t happen. There is no evidence that making the wealthy wealthier leads to more investment, higher productivity or benefits those less well-off. To improve productivity, reduce inequalities and eliminate poverty, investment needs to happen at the ground level through social infrastructure which supports and enables people, particularly women, into paid employment. It would also drive growth by putting money into the pockets of people who will spend it locally rather than accumulating it. The WBG’s plan for improving the economy would instead be to invest in social infrastructure now, which will boost the economy and address structural barriers to economic inactivity.
- Impact on inequalities of cuts to personal taxes – The cut in personal taxes will benefit men more, while doing nothing for those struggling the most with the cost of living crisis and leaving a hole of £23bn in the public finances in 2023. The 10% richest households will gain 200 times more than the poorest households, and male workers will gain two times more than female workers: £623 versus £337 per year on average.
- Cuts to corporation tax – Cuts to corporation tax are unlikely to lead to investment or sustainable economic growth. This is a move that will benefit men disproportionately as the majority of business owners and shareholders, and risks exacerbating international inequality by leading to an international “race to the bottom” in business taxes. This will result in cuts to public services, especially in developing countries, hurting women disproportionately.
- Stamp Duty on Land Tax cuts – The Chancellor’s £1.5 billion a year stamp duty holiday is good news for estate agents and existing homeowners looking to move but will push up prices and disproportionately benefit those in the South East. A proportional property tax system, alongside serious investment in social and affordable housing is the radical overhauling the housing market needs.
- Changes to UC work conditionality – More stringent work conditionality won’t deal with the structural reasons why people – mainly women – cannot work more hours: caring responsibilities and unaffordable childcare and social care, as well as ill-health and disability, compounded by unhelpful employer attitudes. There’s no evidence that benefit sanctions work into getting more people into employment, but they do cause significant hardship to the people receiving them.
- Investment Zones – Areas with looser regulations and lower taxes are a very poor substitute for a programme of state-led investment in tackling regional inequalities. Empirical evidence shows “Investment Zones” create a fraction of the jobs originally estimated and they tend to be low-paid jobs. The tax revenues lost reduce the money available locally for public services, while low levels of regulation encourage illicit activity, financial crime and human trafficking, which impact particularly on women.