Chancellor brings forward £45 billion package of tax cuts in first fiscal statement

The Chancellor used his first fiscal statement to bring forward a £45 billion package of tax cuts, described by the Resolution Foundation as the biggest for 50 years¹. The think tank's analysis, published on 24 September 2022, assessed who gains from the measures and what they cost the public finances¹.

The Resolution Foundation found the tax cuts were strongly focused on higher-income households, driven by the reversal of the rise in National Insurance Contributions, the scrapping of the 45p rate of Income Tax and associated Dividend Tax cuts¹. It estimated that next year someone earning £200,000 will gain £5,220 a year, rising to £55,220 for a £1 million earner, while those on £20,000 will gain just £157¹.

Gains also vary by region. The analysis said those living in the South East or London will see over three-times the gains of those in the North East, Wales and Yorkshire, at an average of £1,600 compared with an average of £500¹. On stamp duty, it said the tax bill on the sale of the average first-time buyer home in London will fall by £6,300, compared to no gain for the average first-time buyer in the North East¹.

On the public finances, the Resolution Foundation estimated that energy support and the weaker economic outlook will increase borrowing by £265 billion over the next five years compared with the Office for Budget Responsibility's March forecast, and that tax cuts cumulatively will cost £146 billion over the same period and raise borrowing to £411 billion¹. It said the Chancellor confirmed that debt falling remains his key metric for fiscal sustainability, and that achieving this by the middle of this decade would require spending cuts of £36 billion in 2026-27, assuming tax rises have been ruled out, broadly equivalent to the total cut to public spending announced by George Osborne in his 2010 Budget¹. It added that debt is on course to rise in each and every year of the forecast period¹.

Why it matters for households

The changes to National Insurance Contributions, the 45p rate of Income Tax and Dividend Tax affect people in work and those receiving dividend income, with the size of the gain depending on earnings¹. The stamp duty change affects buyers of homes, and the estimated benefit differs sharply by region, from £6,300 for the average first-time buyer in London to nothing in the North East¹. The borrowing figures set out in the analysis describe the wider fiscal position within which decisions on tax, spending and public services will be taken¹. How announcements of this kind reach household finances, including through tax and benefit changes, is set out in our guide to budgets and fiscal statements, with further detail in the tax hub and the rates and economy hub.

What happens next

The Resolution Foundation's estimate of £36 billion of spending cuts in 2026-27 assumes tax rises have been ruled out, and would be needed to meet the debt falling metric by the middle of this decade¹. No further dated steps were set out in the analysis.