MAJOR PLANKS of Government tax policy for the last six years should be scrapped by Chancellor Philip Hammond, according to a thinktank.
New analysis by the Resolution Foundation suggests the drive to cut corporation tax and increasing the income tax threshold - key policies of former chancellor George Osborne - could prove harmful in the long term.
The Foundation argues that while raising the amount people have to earn before they pay income tax will have given £765 to low earners by 2020, 80 per cent of the gains from the policy go to higher earners.
Its new analysis also questions the wisdom of cutting corporation tax to the lowest rate among any of the world’s 20 biggest economies when the UK is still struggling to balance the books on public spending.
Matt Whittaker, chief economist at the Resolution Foundation, said: “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.
“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.
“By abandoning the previous Chancellor’s pursuit of narrowing the tax base, he can ensure the government’s coffers are more resilient to future economic shocks.
“And if he wants to use any fiscal leeway to support the incomes of just managing families, increasing work allowances in Universal Credit offer a far more targeted boost to living standards than costly further increases in the personal tax allowance.”