UK tax relief, that overwhelmingly helps rich, balloons to £164 billion

The UK’s tax relief bill has increased to a record £164 billion. The relief which mainly goes towards capital gains exemptions on properties (£27bn), reduced VAT rated (£53bn) and pensions income tax relief (£26bn) has been criticised for overwhelmingly helping the rich and being ineffective use of government funds. The new figures call into question whether the funding is being scrutinised properly by government officials.

The tax relief bill is larger than the UK government’s spending on healthcare and could cover the deficit, at its current level, for 4 years.

Tax relief can be used for a variety of reasons but its ever increasing amount should come as a concern to the taxpayer. Examples that show its often inefficient value include Entrepreneurs’ Relief. This has cost the Treasury £20bn over the last decade and has no measurable impact on entrepreneurship despite being dramatically over budget.

Adam Corlett, Senior Economic Analyst at the Resolution Foundation, said:

“Government spending rightly comes under a lot of scrutiny for cost-effectiveness. But tax reliefs often escape even the most basic checks and debate. Today’s figures show that we spend £164 billion on tax reliefs – billions more than we spend on the health of the nation. Given the looming fiscal pressures our country faces, it is particularly hard to justify huge expenditures on Inheritance and Entrepreneurs’ reliefs, both of which overwhelmingly benefit small numbers of the very wealthiest households.

There are also concerns about who benefits most from the tax relief. Proponents of reducing the relief say it overwhelmingly helps the rich. Incentives for business owners who benefit the richest people in Britain have cost the taxpayer £4bn. Capital gains exemptions and pension relief also help the rich disproportionately.

In a statement Peter Dowd MP, Labour’s Shadow Chief Secretary to the Treasury said:

“Today’s publication reveals the extent of tax giveaways which the Tories have allowed to expand without proper scrutiny. Labour is committed to reducing the corporate tax relief bill and saving taxpayers billions.”

The figure excludes tax relief such as personal tax allowance which is a key part of the tax system.

Analysis from Iwan Doherty- Editor in Chief

The figure should not be used directly as a figure for our corporate welfare bill. While tax relief overwhelmingly helps the richest earners it is not only beneficial to them. However, the rapid rise of this figure alongside our rising corporate welfare in other areas should inspire worry and opportunity. If you want to ‘trim the fat’ off spending this is the place to look, not disability benefits. Labour are right to look at tax relief more closely, there is money to be saved here that can be used for those in much greater need.



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