The income tax cuts will cost £2.7bn next year. The Personal tax allowance will rise to £12,500 next year, up from £11,850. The 40% tax band will begin at £50,000 from April 2019, up from £46,350.
The Shadow Chancellor John McDonnell said
“We now have it confirmed that the pledge to end austerity was a broken promise, like the whole budget. It’s now clear austerity is not over, the cuts to social security will continue. No new money for day to day running of our schools, local police & nothing for local government”.
However, in a surprising move, McDonnell has said he will help pass Hammond’s tax cuts including the increase in the higher rate threshold, he told Today:
“We will support the tax cuts at the moment on the basis that it will inject some demand into the economy.”
This will a drop in the tax bill of the upper middle class as well as the very richest. This in direct contradiction to his statement on the budget where he stated:
“The next Labour government will tax the rich and big corporations to end austerity,
McDonnell defended this by stating “We’re not going to take money out of people’s pockets: simple as that,”
The budget was also declared “a bit of a gamble” by the Institute for Fiscal Studies.
Paul Johnson, the director of the IFS said
“If I were a prison governor, a local authority chief executive or a head teacher, I would struggle to find much to celebrate. I would be preparing for more difficult years ahead.”
The Resolution Foundation highlighted the justice, transport and business departments as likely recipients of future spending cuts. If the cuts are allocated equally, it said that would mean day-to-day spending cuts of 48% in the Ministry of Justice, 52% in the Department for Business, Energy and Industrial Strategy and 77% in the Department for Transport between 2010 and 2023-24.
Beyond the changes to tax, Hammond announced an extra £500m to enable 650,000 homes to be built. Work allowances for universal credit will also be increased by £1.7bn. The NHS will also get more money including £2bn earmarked for mental health treatment.
He granted an extra £160m to counter-terrorism police, and £1bn for the armed forces.
Analysis from Iwan Doherty – Editor in Chief
The Resolution Foundation’s research has beautifully cut through the spin. While this budget has a number of policies that the majority of the public will support and will help working people, or curtail corporate power, it remains a Tory Austerity budget. Not enough money to stop the cuts yet handouts to the rich.
John McDonnell’s support for raising the higher rate tax band should be seen as a betrayal. When did Labour start prioritising handouts to the upper-middle-class overspending on vital frontline services? Labour should support raising the personal tax allowance, it will put more money in the pockets of low-income workers and help stimulate the economy but they McDonnell needs to readdress his priorities on spending if handout ot the middle class is where he thinks the government needs to spend money.