A day after we published our analysis of the distributional consequences of the so-called “mini”-budget, the Chancellor Kwasi Kwarteng announce a U-turn on the abolition of the higher rate of income tax (45%, for yearly incomes above £150,000). This was the most contentious and outrageous, at a time of a cost-of-living crisis, of the tax cuts announced by the Government, which also include a reduction of 1 percentage point (from 20% to 19%) in the basic rate, the abolition of the Health and Social Care Levy, a cut in the Stamp Duty, cancelation of a planned hike in corporate tax, further tax reductions for individuals living in investment zones, a freeze of alcohol duties, and extensions of duty-free areas. Still, the measure accounted for a yearly cost to the budget of only up to £3 billion, out of more than £40 billion of the whole package. While the Government hopes that scrapping this extra gift to the rich would take the steam out of the wide and transversal opposition to the bill, our analysis indicates that the overall tax cut is still deeply regressive.
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