Economically illiterate and morally bankrupt: Tory tax cuts condemned as experts warn only richest gain

The UK Government’s tax cuts were branded “economically illiterate and morally bankrupt” by the leader of Scottish Labour yesterday.

On the eve of Labour’s conference, Anas Sarwar warned the so-called mini-budget announced on Friday risks crashing the economy and will push more families into poverty as the cost of living crisis tightens.

He spoke out as a leading economic think tank claimed Chancellor Kwasi Kwarteng’s package of tax cuts will benefit only those earning over £150,000, the richest 1%. The Scottish Government must now decide if similar cuts will be implemented here.

On Friday, Kwarteng unveiled the biggest programme of tax cuts for 50 years and what observers described as one of the most significant economic statements ever. The package of measures included the abolition of the top rate of income tax for the highest earners, funded by more than £70 billion of increased borrowing.

Sarwar, speaking at the Scottish conference of the Unite trade union, said the plans were reckless and risked pushing the economy into recession and more families into poverty.

Writing in The Post today, he continues: “Lifting the cap on bankers’ bonuses and a tax cut for top earners, is cruel and economically nonsensical in equal measure. The Tories are determined to redistribute wealth but, shamefully, from those who create it and need it to those at the top. Not only is this economically illiterate, it is morally bankrupt.”

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Meanwhile, Prime Minister Liz Truss insisted she is “unapologetic” about the changes which will “usher in a decade of dynamism”. Chief Secretary to the Treasury Chris Philp said: “We’re going to get growth delivered. And we’re not going to sort of worry about the politics of envy, or the optics of it.”

On Friday, the pound crashed to its lowest level since 1985 as the financial markets reacted while the Institute of Fiscal Studies claimed only those earning over £150,000 would see any benefits from the tax cuts.

The respected economic think tank’s director Paul Johnson said: “If you’re part of the 99% with less than £150,000 coming in, then you’re still going to be worse off as a result of tax changes.”

The economic package will do nothing to stop two million people falling below the poverty line, according to the Resolution Foundation. Analysis of the mini-budget by the think tank said “only the very richest households in Britain” will see their incomes grow as a result of the tax cuts.

It warned the wealthiest 5% will see their incomes grow by 2% in 2023-24, while the other 95% of the population will get poorer as the cost of living crisis continues. Tony Danker, director general of the Confederation of British Industry, said the measures will not “suddenly unlock growth” and called for a “broad-based” plan.

Income tax rates and bands north of the Border are decided by the Scottish Government, which is expected to publish an emergency budget review within a fortnight. Nicola Sturgeon has so far said she would not “blindly” follow the Chancellor’s income tax cuts and said the super-rich “would be laughing all the way to the actual bank”.

Labour accuse the UK Government of “casino economics” with the next generation set to become poorer because of their “trickle down” approach. Speaking at union Unite’s Scottish conference in Glasgow, Sarwar stressed he did not want the different tax policies adopted by Westminster and Holyrood to become an “ideological fight about tax”.

He said Labour supported the devolution of income tax, which allowed the Scottish Government to “make different choices and different decisions in order to have different priorities and invest differently in our public service”.

But he added: “It needs to be demonstrating people in Scotland are getting value for money. And at the moment they’re not getting value for money because of the failures of the SNP Government, not a failure of the devolution model.”

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Unite’s Scottish secretary Pat Rafferty was also scathing of Kwarteng’s mini-budget, branding the Conservatives as “a class of people who think they are born to rule”.

He said: “This hasn’t changed one jot with the latest incarnation of Margaret Thatcher in Number 10 in Liz Truss.

“If anyone was in any doubt about that, they only had to listen to the so-called mini-budget announced yesterday by the Chancellor of the Exchequer.

“A budget for the rich and the powerful, a budget for the spivs and speculators, the very same people who caused the financial crash in 2008.

“A budget working-class people will pay the price for, for years and years to come.”

Meanwhile, SNP Westminster leader Ian Blackford demanded the House of Commons is recalled so Kwarteng and prime minister Liz Truss can be held to account “for the depth of the damage caused by the inequality and incompetence of the budget which has triggered a major financial crisis”.

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He said: “The Prime Minister and her government have taken one of the biggest, most reckless, right-wing financial gambles in decades and are dodging all scrutiny on the devastating chaos it has created. They cannot be allowed to hide.”

However, Tories in Scotland have urged SNP ministers in Holyrood to follow the UK Government’s example and cut taxes. Conservative finance spokesperson, Liz Smith, said: “The Chancellor has given a welcome shot in the arm to the UK economy with his support for hard-pressed taxpayers squeezed by the global cost of living crisis.

“The package he announced equates to a £630 million boost for Scotland and it’s up to the SNP Government to get on board with his growth plan which would cut taxes for 2.4 million Scots.

“It is wrong that Scots already pay higher tax than their counterparts in the rest of the UK and, unless the SNP match these tax cuts, that gap is going to widen, which will further hamper Scotland’s already poor productivity and competitiveness.”

But Scottish Fair Work minister Richard Lochhead rejected that approach, saying the Conservatives had brought forward a “budget for the rich and for bankers” that would “provide cold comfort for millions of people in Scotland”.

Lochhead, also speaking at the Unite Scotland policy conference in Glasgow, said it was a “budget for the very few and not the many” which “reinforces inequality in one of the Western world’s most unequal societies”.

He said: “So much for levelling up. Thankfully income tax rates and bands are devolved here in Scotland and the Scottish Government will set out its tax policies at the Scottish budget.

“We will continue to pursue our fairer and more progressive approach to taxation which has protected low earners while raising additional revenues for public service.”

Lib Dem MP Christine Jardine said the Scottish Government had to “stop pointing the finger and shifting the blame” and offer a comprehensive package that will revitalise the Scottish economy and support struggling households.

She said: “We need government advisers to examine the potential implications of a tax differential that could discourage inward movement in the employment market from the rest of the UK.”

Scotland is the highest-taxed part of the UK and the Chancellor’s announcement only widens the tax gap between Scotland and England.

“We need to know if that bigger gap will mean money moving out of Scotland and down south. This is a consequence that could undermine, rather than promote, economic growth, which is why examining all the implications is so important.”