Chancellor Philip Hammond has been urged to use his forthcoming Autumn Statement to reverse a string of “successive cuts” introduced by his predecessor George Osborne.
The comments come from think tank The Resolution Foundation, which says that Osborne’s drive to cut corporation tax and increase the income tax threshold are likely to prove harmful for the UK in the long term.
According to the think tank, raising the income tax personal allowance will have provided the average low earner with approximately £765 by 2020 – but 80 per cent of all gains from the policy will ‘benefit high earners only’.
Matt Whittaker, chief economist at the Resolution Foundation, said: “With the Chancellor indicating that he will press the ‘fiscal reset’ button in his Autumn Statement, now is the time to rethink the Government’s tax policy.
“The £32bn worth of tax cuts announced since 2010 has been the difference between the Government hitting and missing its deficit reduction targets in the last Parliament, or indeed in this one.
“Tax cuts on this scale have clearly played a role in supporting household incomes, though around four-fifths of the £21bn due to be spent on raising the personal tax allowance by 2020 will have actually gone to the richest half of households”.
Resolution also questioned the ‘wisdom behind’ cutting corporation tax to one of the lowest rates among the world’s largest economies at a time when the UK is still attempting to balance the books on public spending.