Opinion

Jeremy Hunt's tax cuts are a 'wasted opportunity to support those who need it most'

Analysis from think tank IPPR of the Autumn Statement shows that Jeremy Hunt's tax cuts aren't all that they seem

Chancellor of the Exchequer

Wednesday’s budget saw chancellor Jeremy Hunt cut taxes, including national insurance contributions to the tune of £9bn – quite the splurge at a time when public services are under such extraordinary pressure.

For a high earning couple this is a nice little give away, just over £1,500 per year. However, our analysis shows that just 3% of the gains will go to the poorest, while the richest fifth of households will hoover up around 46%. This was by-and-large a move which bolsters the finances of the better off.  

But what was on the table for lower income households?  

Thankfully, and after some apparent wavering, the government saw sense and took action both to uprate social security by an appropriate level of inflation and to increase housing support for private renters after a three-year freeze. We welcome those measures, though on both counts there is more than meets the eye.  

Change a Big Issue vendor’s life this Christmas by purchasing a Winter Support Kit. You’ll receive four copies of the magazine and create a brighter future for our vendors through Christmas and beyond

Firstly, in the past couple of years the government introduced emergency cost of living payments worth £900 per household for low-income households – the withdrawal of these payments mean that even with uprating, many households will see their annual income fall overall, despite facing ever higher prices. Just because inflation is slowing doesn’t mean prices have fallen – nor are they expected to in future.  This really hasn’t been talked about enough, but for many there is a cliff edge in support.  

Secondly, the “thawing” out of housing support, making 30 per cent of private rents in a local area affordable under housing allowances, is a temporary fix – with levels of housing support expected to drift once again from reality from 2025. Even when housing support was last increased in April 2020, 560,000 households continued to face shortfalls in support, which invariably eats into household budgets intended for other essentials and creates a risk of homelessness.  

So despite this (welcome) tinkering our system fails to deliver affordable housing for many, and this goes beyond any one government department. To begin to fix it, we should cap rent rises and widen the scope of homes affordable under our housing support scheme in the short-term, while in the longer-term we need robust plans to expand the amount of social housing to insulate people on low incomes from the insecurity of the private rental market altogether.  

Behind Wednesday’s tax-cutting announcement (beyond an electoral bribe for Middle England) is an anxiety to improve work incentives, making sure people are meaningfully better off in work to try and increase employment rates. If the government was serious about this, it could do much worse than to look how benefits are withdrawn as people increase their earnings, so-called “taper rates”. These see 55p taken away for every pound a household earns beyond certain small allowances. It works very much like an additional tax on the lowest earners, and yet minsters would be mortified if the average worker were subject to these sorts of rates. Cutting these taper rates and increasing work allowances so that people keep some of their support as they move into work would offer much better targeted support.   

And of course not everyone can work, including due to long-term sickness and disability. Announcements around personalised support for disabled people could be genuinely transformative, recognising the need for specialist support which people with health conditions can engage with if and when they want to. 

However alongside this the government is planning to toughen up conditions for claiming. This week’s plans to reform the fit for work test will mean that from 2025, people with health conditions applying for universal credit will not be protected from requirements and sanctions if their assessor considers that they could work from home. They’ll also lose out on thousands of pounds of support   compared to what they’d have previously received. The reforms are predicated on the idea that everyone can work from home – but home-working and other forms of flexibility is still relatively uncommon in lower-paid work.   

Overall, the government needed to go further for those on low incomes and this tax cut was far from the best use of £9bn – a wasted opportunity to support those who need it the most as we get into the depths of winter.  

Henry Parkes is the principal economist and head of quantitative research at the Institute for Public Policy Research.

Support your local Big Issue vendor

If you can’t get to your local vendor every week, subscribing directly to them online is the best way to support your vendor. Your chosen vendor will receive 50% of the profit from each copy and the rest is invested back into our work to create opportunities for people affected by poverty.
Vendor martin Hawes

Recommended for you

View all
Sunak has been like an automaton for so long. Our leaders shouldn't fear being seen as human
Paul McNamee

Sunak has been like an automaton for so long. Our leaders shouldn't fear being seen as human

Smart, no-nonsense moves by Starmer show how toxic and incompetent the Tories have really been
Sam Delaney

Smart, no-nonsense moves by Starmer show how toxic and incompetent the Tories have really been

Food banks can take hope from election result – if Labour takes action before another tough winter
food bank
Charlotte White

Food banks can take hope from election result – if Labour takes action before another tough winter

Electric vehicle charge points to become centre of new privatisation row – unless Labour steps in
An electric car being charged
Sophie Flinders

Electric vehicle charge points to become centre of new privatisation row – unless Labour steps in

Most Popular

Read All
Renters pay their landlords' buy-to-let mortgages, so they should get a share of the profits
Renters: A mortgage lender's window advertising buy-to-let products
1.

Renters pay their landlords' buy-to-let mortgages, so they should get a share of the profits

Exclusive: Disabled people are 'set up to fail' by the DWP in target-driven disability benefits system, whistleblowers reveal
Pound coins on a piece of paper with disability living allowancve
2.

Exclusive: Disabled people are 'set up to fail' by the DWP in target-driven disability benefits system, whistleblowers reveal

Cost of living payment 2024: Where to get help now the scheme is over
next dwp cost of living payment 2023
3.

Cost of living payment 2024: Where to get help now the scheme is over

Strike dates 2023: From train drivers to NHS doctors, here are the dates to know
4.

Strike dates 2023: From train drivers to NHS doctors, here are the dates to know

The Big Issue

Sign up to get your FREE Doctor Who Archive Special

Celebrate the 14th series with your FREE edition of the Dr Who Special Archives