Winners and losers – a budget breakdown

The changes in taxation for top and bottom earners grabbed last week’s budget headlines, with a focus on the winners and losers. But there are other important dimensions to the changes too.

At the top of the income league, it’s London and the South East which stands to gain the most. More than half of those earning more than £150k a year in 2009/10 live in this part of the UK, a total of 160,000 people out of the 305,000 tax-payers in this bracket.  This is a massive concentration of prosperity that surely skews the UK’s economy and politics.

In contrast, there are just 4,000 top-rate taxpayers in Wales who will enjoy a budget boost, with Wales having the smallest proportion of people with an income of over £150,000 of all UK nations and regions, at a mere 0.29%.  If the theory that lowering top-level taxation is an incentive for enterprise and investment is correct, then Wales won’t be seeing much of a stimulus simply because there are so few well-off people here.

The picture at the bottom of the income league is rather different. Those with incomes below £10k a year are spread much more evenly across the UK’s nations and regions.  Yet this low-income group varies considerably in its importance from place to place.  Given everything we know about Wales’s earnings and the economy, it’s no surprise to find that those with incomes below £10k account for 37% of all tax-payers (more than half a million people), the second highest proportion in the UK.  That this number of people will no longer pay tax is welcome, although some will make little or no net gain because of changes to tax credits.

There is also a critical gender dimension.  Both men and women benefit to roughly the same extent from the increase in the basic rate tax threshold, with slightly more women in the UK having earnings below £10k (5.7 million women compared with 4.5 million men).

It’s at the top that the gender gap opens up – across the UK as a whole men are five times as likely as women to have an income of more than £150k a year.

Whatever you may think of the reduction in the top rate of tax to 45p (and even experts are skeptical about its benefits), it is very clear that the main beneficiaries of this aspect of the Chancellor’s budget are men in the south-east of England.

Data is from HMRC taxation statistics http://www.hmrc.gov.uk/stats/income_distribution/menu.htm Table 3.11

Victoria Winckler is Director of the Bevan Foundation. 

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