Chancellor announces £45 billion of tax cuts

The Chancellor announced £45 billion of tax cuts on 23 September 2022, an event the Resolution Foundation described as blowing the budget¹. The think tank's analysis, published on 30 September 2022, sets out how the measures interact with the public finances and with household incomes¹.

According to the Resolution Foundation, the package confirmed that week would boost the incomes of the richest five per cent by 5.5 per cent, or £9,200, on average, while cutting those of the poorest fifth by 2 per cent, or £300, in cash terms in 2022-23¹. It put the value of the tax cuts to someone earning £1 million next year at £55,000¹. The same analysis states that the first spending cut under discussion is to working-age benefits, which may be uprated in line with earnings rather than prices in April, since earnings are forecast to be considerably lower than prices, at 5.5 per cent against 10 per cent¹. That would save the Treasury around £5bn a year permanently, but a typical working family on Universal Credit with two children would lose over £500 a year¹.

The Resolution Foundation also cited research on the effect of tax changes by income group, estimating that a tax cut worth 1 per cent of GDP for the bottom 90 per cent produces 3.4 percentage points of employment growth over a two-year period, against 0.2 percentage points for the same size cut for the top 10 per cent¹. Separately, it pointed to work estimating that removing all preferential tax treatment from non-doms would raise £3.2bn, drawing on reforms to the non-dom rules in 2017 that removed the right to have overseas income untaxed for long-stayers in the UK¹.

Source: Resolution Foundation¹

Why it matters for households

The figures describe distributional effects rather than individual entitlements. On the Resolution Foundation's numbers, the changes raise incomes most for the highest earners and reduce them for the poorest fifth in 2022-23¹. The benefit uprating question matters for working-age households in receipt of Universal Credit: uprating by earnings rather than prices in April would leave a typical working family with two children over £500 a year worse off, according to the analysis¹. The £5bn annual saving to the Treasury from that change is described as permanent¹. Anyone affected by the tax changes is dealing with measures announced on 23 September 2022 and, in the case of benefits, a decision that had not been taken at the time of publication¹.

What happens next

The Resolution Foundation states the Chancellor has until 23 November to make the numbers add up¹. It notes that much lower taxes mean less public spending eventually, so spending cuts are coming, and that the first cut on the table is to working-age benefits¹. No further dates are given in the source.