Johnson pledges to prioritise tax cuts for those on lowest pay

Johnson pledges to prioritise tax cuts for those on lowest pay

Boris Johnson has insisted he would prioritise tax cuts for the lowest paid after experts suggested his plans to offer relief for people earning more than £50,000 would cost £9 billion.

The Tory leadership campaign favourite has floated plans to increase the threshold at which people start paying 40% income tax but indicated he could begin by tax for those on the lowest pay.

Analysis by the Institute for Fiscal Studies (IFS) said Mr Johnson’s income tax proposals would mainly benefit the top 10% of earners.

IFS analysis of Boris Johnson’s proposed income tax reform (IFS/PA)
IFS analysis of Boris Johnson’s proposed income tax reform (IFS/PA)

But he has also suggested raising the amount people can earn before they start paying national insurance contributions (NICs), which would benefit lower earners.

The would-be premier has not said how much he would like to raise the threshold by – currently earnings over £8,632 are subject to NICs – but the IFS said raising it by £1,000 would take 600,000 workers out of NICs and cost around £3 billion a year.

The economic think tank said it was “not clear” that spending so much on tax cuts would be compatible with both ending austerity in public spending and the “prudent management of the public finances”.

We will bring forward a tax proposal, a package that actually begins by lifting thresholds ... for those on the lowest pay

Responding to the analysis, Mr Johnson told LBC Radio “I don’t recognise those figures,” adding: “We will bring forward a tax proposal, a package that actually begins by lifting thresholds … for those on the lowest pay.”

The former London mayor said he wanted to boost prosperity for poorer households.

“What I want to do as prime minister, if I am lucky enough to serve, is to bring the whole country together in the way that we brought London together,” he said.

Mr Johnson has said he wants a “debate” about raising the threshold at which people start paying 40% tax from its current level of £50,000 to £80,000.

The IFS analysis suggested that around 3.2 million workers would gain from raising the higher-rate tax threshold, along with 0.4 million pensioners.

Around three-quarters of the gains would go to those in the top 10% of earners, the IFS said.

While only about 8% of individuals would gain in the short run, over time a “considerably larger” number would benefit at some point in their lives, either directly or because they are in a household with a higher earner, due to income variations over the course of a working career.

Raising the floor for NICs helps low earners, though raising tax credits would be much more effective and better targeted if that were the key aim

IFS research economist Tom Waters, one of the authors of the analysis, said: “These are expensive pledges to cut tax.

“Raising the higher rate threshold as far as £80,000 would be a radical change benefiting high-income households only, though it is important to be aware that the numbers paying higher rate tax have crept up over time, largely unannounced.

“There are now more than four million higher-rate taxpayers, compared with 1.5 million 30 years ago.

“Raising the floor for NICs helps low earners, though raising tax credits would be much more effective and better targeted if that were the key aim.

“These pledges between them will cost many billions of pounds.

“It is not clear that spending such sums on tax cuts is compatible with both ending austerity in public spending and prudent management of the public finances.”

Shadow chancellor John McDonnell said: “Johnson demonstrates it’s the same old Tory story of tax cuts for the wealthiest and continuing austerity for the rest.

“He’s proving that he wants to be a prime minister for the few, not the many.”

- Press Association

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