“More generous tax relief means the government is providing more in-work cash support to Britain’s richest households than poor families are receiving, according to a left-leaning thinktank.
A study by the Fabian Society said nearly half the savings made in welfare payments in recent years had gone on increases in the tax-free personal allowance, rather than being used for deficit reduction.
The thinktank accused the government of increasing inequality by stealth and called for a five-year freeze on tax-free allowances to “rescue social security”.
The Fabian Society added that the first priority for any money saved from freezing tax allowances should probably be using it to make universal credit more generous, but said consideration should also be given to a basic income – a payment given unconditionally to all citizens.
Both the chancellor, Philip Hammond, and his predecessor, George Osborne, raised tax allowances while keeping a tight rein on benefits.
The result of this approach, according to the thinktank, is that on average, households in the fourth and fifth income quintiles (the top 40%) receive more in tax relief than households in the poorest fifth get in means-tested benefits.
The Fabian Society study showed the cost of tax allowances had increased by 43% from £95bn to £136bn from 2012-13 to 2017-18. Over the same period, social security payments to working-age adults and children fell from £95bn to £94bn. As a share of national income, tax allowances rose from 5.6% to 6.4%, while payments to working-age adults and children fell from 5.5% to 4.4%. …”