A few attempts have now been made to model the impact of Reform’s changes to the tax system that Nigel Farage spoke about in his recent speech. They all show it to be tremendously regressive. Most of the giveaway would go to the very highest earners in the UK over the people who struggle with the basic costs of day to day living, as well as the “average worker” they claim to prioritise.
This chart alone, shared by Sky News, reveals the stark truth of who benefits.
In more detail:
There’s one change to the tax system I missed in my previous post. Farage confirmed that the previously-announced Reform policy of raising of the higher tax band such that you would now have to have an income of at least £70,000 to start paying it as opposed to the current value of £50,271.
This was previously estimated to in theory [cost the state another £18 billion](https://www.ippr.org/media-office/analysis-of-reforms-tax-plans. This is on top of the incredible cost of the other policies we already covered. And it is extremely regressive especially when added to the effect of the shift in the threshold for the basic rate and the other adjacent policies announced.
The IPPR models that the increase in the higher income tax threshold alone would see 80% of the tax break go to the richest 20% of households. They would see an increase of £2700 in average annual disposable income, compared to an estimated £17 granted to the poorest 20%.
The Independent also demonstrates how the majority of the extra income based on these policies will go to the uber-rich rather than the average working person Reform hypocritically claims to love so much.
They quote Stuart Adam, a senior economist at the IFS.
Stuart Adam, a senior economist at the influential Institute for Fiscal Studies (IFS), said that the “biggest beneficiaries [would be] the top 10 per cent”. “It mainly benefits the better off,” he told The Independent.
He added: “We are talking about the upper middle [class] being the biggest beneficiaries as a percentage of income, and the best-off being the biggest beneficiaries in cash terms.”
Around a third of UK adults don’t earn enough to pay income tax even under the current rules. These people obviously won’t be helped at all by the changes in thresholds. Adam also noted that some of the “extra” income for people on Universal Credit would anyway be negated by the consequent reduction in those payments.
They also report from a model created by Policy Engine that showed:
Mr Farage’s plans to hike the tax-free income allowance would boost the incomes of the bottom tenth of earners by 1.3 per cent.
By contrast, the calculations show that the top 10 per cent of earners would see their incomes boosted by 4.2 per cent under Reform’s plans.
To be in the top 10% of earners in 2022-2023 you’d have had to be earning £91,000 a year already, a figure which will have only gone up since then. The top 80% of income earners started at £66,000 back then.
Sky News published some charts showing this regressive result in action when it comes to disposable income; income that the recipient can actually use. The regressive nature of these changes are even starker.
Again based on IPPR figures, in absolute terms the richer you are the more extra income you will receive based on Reform’s changes. They plot changes in disposable income by existing income decile.
They summarise as:
The top 10% of households, by disposable income, have £3,000 a month to spend after housing costs, council tax and direct taxes. A couple in this category would have £5,290 to spend.
These people would gain almost £5,983 in disposable income each year as a result of the changes.
The bottom 10% of households have less than £693 to spend on things such as heating and food each month. The figure rises to £1,195 for a couple. These households would gain an extra £221 per year.
When challenged about the fairness of this, Farage claimed “that people on lower incomes would benefit more than those on higher incomes when the tax cuts were viewed as a proportion of their total salary”.
However, that is another Farage lie. Even in percentage terms the lowest-income decile of people receive the least in terms of extra disposable income.
In terms of the cost to the state:
The top 10% of households would receive 28p for every £1 spent, while the bottom 10% would receive just 2p.
Dr Jamie O’Hallaran, senior research fellow at IPPR, sums the stupidity of these changes well – especially when done by a party that claims to care about left-behind working-class folk.
“These tax cuts would be both very costly and disproportionately benefit those on the highest incomes.
“At a time when public services and household finances are under such pressure, this would be highly irresponsible. Polls also show this is not what the public want.
“Voters are crying out for public services that work, not tax cuts for the top 10%.”
[…] speaking, Reform exists to help the rich get richer, and if they have to trample over the few remaining rights of the average worker to do that then […]