Molly Pollock takes a look at another side of the what the Tory budget hands to the already wealthy
So on Friday we got Kwasi Kwarteng’s mini budget with its slashing tax cuts for the rich, for those who have. Apparently it’s the first of many such cuts by a chancellor who wants to “undo 25 years of social democratic tinkering”, so the giveaway which saw the pound’s slide to add £5 to a tank of petrol is set to continue. The pound’s slide has also vastly increased the cost of government borrowing which has risen exponentially with the cuts.
Whilst some Tories have kept quiet, others like John Lamont, MP for Berwickshire, Roxburgh and Selkirk, took the opportunity to engage in a bit of self-promotion on Twitter.
John is of course photographed in one of the more affluent areas of Kelso where house prices are way above what many can afford. His assertion needs to be taken with a pinch of salt. Although Scotland has the third highest typical salary across the countries and regions of the UK at £26,007, (the average being £25.971, vastly skewed by earnings in London) the Borders is an area with one of the lowest hourly rates of pay.
Earnings of £12.90 an hour do not enable people to attain the £150,000 threshhold to gain the most from Kwarteng’s tax reductions, although undoubtedly there will be people in the Borders set to benefit. According to the Resolution Foundation it’s only the top 5% of workers who will gain significantly.
John Lamont’s boss, Douglas Ross, unsurprisingly called on the Scottish Government to follow in Kwarteng’s footsteps and reduce its tax rates.
There are of course extremely wealthy people in Scotland. The Sunday Times Rich List indicates the top ten wealthiest people in Scotland have a combined fortune of £23.054 billion. The top ten people are listed below.
But John Lamont wasn’t the only one to wade in. Three former economic advisers to the Scottish government warned that the country faces a flight to England of high earners and wealth creators unless Conservative tax cuts are matched. Malcolm Bruce – remember him? or Baron Bruce of Bennachie as he now is with his seat in the Lords, was LibDem MP for Gordon until turfed out in 2015. Malcolm decided to put an oar in the tax reduction rapids.
Presumably, with the highest rate in Scotland at 46% compared to the 40% which will come in April in England, there’s always a possibility of some relocating, but much hassle for not in their terms a vast amount of gain. For those at the other end of the tax scale the reduction of the basic rate of 20% to 19% in England brings it into line with Scotland’s starter rate.
Many higher rate Scottish taxpayers on Twitter are eager to point out that they are happy to pay a bit more to help bring about a more equal society and to keep the benefits they appreciate. Council Tax is lower in Scotland with Band D paying £590 less than in England. Water charges in Scotland are lower than in England. For those who qualify Scottish Child Payment adds £25 per week (£1,300 pa) to family budgets for each child under 16 from November. Prescriptions are free in Scotland, saving an average of £177 per person pa. Free school meals for Primary pupils saves families £400 pa. Free tuition at Universities saves £9,000 pa for every child in the family who attends university. Free Personal Care valued at around £10,000 pa for those who need it. Free Childcare at £4,900 per child pa. A baby box for every new mother, valued around £160. We have more GPs per head than in England and our nurses are paid more. Then there’s our scenery, quality of life and friendly, welcoming, people.
During the Covid19 lockdowns and throughout the entire pandemic it was mainly the lower paid, certainly not the millionaires or billionaires who got us through – those manning information phone lines, ambulance drivers, nursing staff, all the others staffing hospitals, medical centres, surgeries and vaccination centres, volunteers who did shopping for those shielding, the shop staff and drivers who delivered food and other essential items. Those were the people who mattered, who worked their socks off for the good of us all. But it won’t be them who benefit from Kwarteng’s giveaway bonanza.
Edwin Hayward, author, internet entrepreneur and domain name expert Tweeted the percentage increases Kwarteng’s changes would make in England. To those who have…
And for those moguls living in Scotland who may have ideas about relocating to save tax money (or that tax money which isn’t already in offshore tax havens) you’ll need to head to London or the south east, abandonning your estate or Georgian townhouse to downsize to a much more modest property, one that hasn’t already been seized by Russians even more wealthy than you.
Meanwhile poverty rises.
And whilst the many try to work out how to pay soaring mortgage, heating, food, clothing and transport costs, and wonder in trepidation what else Kwarteng has up his magician’s sleeve, others have been amusing themselves by making even more money.
UK channcellor Kwasi Kwarteng previously worked, providing political advice, for Odey Asset Management. His mini budget has crashed the pound. There are rumours that Odey’s hedge fund increased 145% on bets against UK government bonds.
Neil Mackay, journalist, author, filmmaker, broadcaster responded to someone pointing out that those earning £100,000 were not wealthy with this tweet:
“What kind of heart must you have to make this the issue you care about – rather than raise your voice for those on minimum wage or struggling on social security or those who are disabled and poor? We’re witnessing the death of empathy in the souls of so many in this country today.”
What kind of heart must you have to make this the issue you care about – rather than raise your voice for those on minimum wage or struggling on social security or those who are disabled and poor? We’re witnessing the death of empathy in the souls of so many in this country today pic.twitter.com/yg0jYe9hMN— NeilMackay (@NeilMackay) September 25, 2022
Now the even bigger question is will Kwarteng’s giveaway to the already wealthy work. Well the runes are far from positive. An LSE paper The Economic Consequences of Major Tax Cuts for the Rich used data from 18 OECD countries over the last five decades to estimate the causal effect of major tax cuts for the rich on income inequality, economic growth, and un-employment. The report concludes:
“We find that major reforms reducing taxes on the rich lead to higher income inequality as measured by the top 1% share of pre-tax national income. The effect remains stable in the medium term. In contrast, such reforms do not have any significant effect on economic growth and unemployment.”
The UK is already in dire straits, lagging behind other countries with the highest interest rate in 14 years, highest energy costs ever, highest debt (£2.3+ trillion), highest inflation in decades and probably already in recession.
Laughing all the way to their offshore accounts for some while the rest of us batten down the hatches for a desperate winter.