Highest UK earners to receive same benefits as poorest by 2020

By Joe Mellor, Deputy Editor

Generous tax breaks have helped create a “shadow” welfare state for the 20 per cent wealthiest in the UK, research has revealed.

The Fabian Society believe these high earners will take almost the same as the worst off fifth take in benefits.

The Fabians’ general secretary, Andrew Harrop, indicated his research illustrates the latest Budget was another step in remodeling the welfare state as we know it. This shift has moved resources from the poorest to in society to the wealthier.

Harrop said: “By the end of the decade, if the Conservatives deliver on their manifesto promises, households in the top fifth of the income distribution will be receiving an average of £9,400 a year in tax allowances and welfare payments; while the poorest fifth of households, for whom benefits may be their only source of income, receive an average of £10,200.”

“Duncan Smith resigned over unfair choices between tax cuts for the rich and benefit cuts for the poor. But he spent six years in cabinet supporting welfare cuts and tax allowance rises which have together led us to the position where the basic financial help for a two-earner couple is higher than for an unemployed couple.

“The government must explain how it can justify giving more money to working couples through the ‘shadow welfare’ of tax reliefs than to the unemployed through benefits.”

The Tories promised to increase the tax-free personal allowance £12,000 by the end of this parliament. However, as the allowance has risen the benefits of further steps have gone increasingly to workers in the middle of the income distribution, with the poorest – and the unemployed – missing out altogether.

The Institute for Fiscal Studies thinktank said that 43% of adults already earned too little to pay income tax, so would not benefit from Osborne’s increase in the personal allowance.

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