The Chancellor’s budget speech was strong on rhetoric and good intentions. However, with the exception of the property tax, it was almost as though Rachel Reeves was unaware of the existence of the super-rich or the rising income inequality in our society which Morris Pearl, Chair of the Patriotic Millionaires and a former Managing Director at Black Rock believes “threatens everything we hold dear: our democracies, our planet and our broader society…..”. Much of her address appeared to exclude the top 10% of earners.
In the Spring of 2025 Oxfam published its report “Takers not Makers” which suggested that global billionaire wealth had increased by £1.5trillion in 2024, a significant jump compared with the previous year. In contrast, according to the Office of National Statistics (ONS) the median household disposable income in the UK for the financial year ending 2023 was £34,500. This was a 2.5% decrease on the financial year ending 2022 when median household income was £35,100.
According to figures released by the Equality Trust, the UK is the sixth most unequal country by income of the 38 OECD countries. (Organisation for Economic Co-operation and Development). Many employees are paid the minimum wage to pay for this. The challenge is to address pay differentials within organisations so that everyone gets a fair day’s pay for a fair day’s work.
Unless Government tackles pay differentials, chasing inward investment in search of growth will make the rich richer and create low paid jobs for the masses as it has since the 1980s. The Equality Trust continues that “high income inequality weakens the social fabric and sense of cohesion between us. We are more likely to live, work and socialise in socially and economically segregated ways which can aid misunderstanding, resentment and undermine the sense of shared identity and purpose needed for a cohesive society”.
Widening income inequality and increasing poverty are the great social evils of our time and the root cause of many of today’s problems, “Trickle down” economics and the privatisation of public services has created dozens of millionaires and turned millionaires into billionaires whilst the vast majority of people are little better off than they were before the 2008 Banking Crisis. Since when the country has had to weather BREXIT (which none of the major Political Parties supported) and the COVID 19 pandemic.
In April 2024 there were 4.5m children being brought up in poverty in the UK, 70% of whom had a parent in work. That was an increase of 0.2million over 2022/23. In March 2023 there were 107,317 children in the care of the local authority in the UK – the highest number ever. In December 2023 there were 112,660 homeless households living in temporary accommodation in England – including 145,600 children. And 2 million older people living in poverty.
Removing the two-child cap on child benefit was absolutely the right thing to do. As was increasing the minimum wage and living wage; although if the income of the high earners increases by more it will not reduce income inequality. Extending the period for which the tax-free personal allowance is frozen will drag more people into income tax and all will pay more. The least impact will be felt by the higher earners – which was also the case during the cost- of-living crisis.
One cannot help thinking that a compassionate Government would have had a stated aim to raise the tax-free personal allowance and fix it at 60% of Median Household Income so that no one living in poverty pays tax. This could be cost neutral by introducing three higher income tax bands. The salaries of those at the top of major corporations, banks and the privatised utilities (gas, electricity, water) run into millions. And yet the top threshold for income tax is £125,140. There could be at least three more at say £250,000, £500,000 and £1,000,000 or the existing ones raised and adjusted?
A starting point would be to raise the state pension to 60% of median household income to lift all older people out of poverty, improve the quality of life of everyone and reduce demand upon the NHS. Secondly to raise the tax-free personal allowance to 60% of median household income so that no one living in poverty has to pay income tax –the later to be achieved by increasing taxation in the higher bands. And thirdly abolish the standing charge on gas and electricity bills and spread it across the unit costs perhaps with a higher unit cost the more is used. This is considered in more detail in my book “Income Inequality and Poverty”.
Perhaps, the Government could be encouraged to do an income inequality and poverty audit on all it does to ensure it is reducing income inequality and poverty and not increasing them.
Government cannot go on taxing the poor to protect the rich.
Chris Perry’s latest book is Income inequality and poverty: the impact on health and social care.
* Chris Perry is a former Director of Social Services for South Glamorgan County Council, a former Director of Age Concern Hampshire, a former Non-Executive Director of the Winchester and Eastleigh Healthcare NHS Trust and a former presenter of an award-winning public affairs programme on Express FM.
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20 Comments
Always good to read Chris Perry’s well informed contributions.
The Alston Report on inequality a few years ago would have been another good starting point, but I’m afraid the party leadership showed no inclination to respond to it.
“ The least impact will be felt by the higher earners”
Actually, freezing the personal allowance impacts on income tax payers at their marginal rate of taxation. In other words, those dragged into the 20% bracket will lose 20% of the amount the personal allowance has not increased. Those in the 45% bracket will lose 45% of the amount their personal allowance has not increased, it therefore does hit higher earners more in absolute terms.
#Jenny Smith. Rising food prices hit the poor more than the rich as food is an essential item on which people on low incomes spend a greater proportion of their money. Similarly, with the frozen tax thresholds. Income over the top threshold of £125,140 will be taxed as before. It will therefore make only a marginal difference to people with salaries in excess of £1m. Pushing people into a higher tax band will, therefore, have the greastest proportional effect on low income groups.
Our party has come a long way on this, under Nick Clegg (hardly a bleeding heart lefty) we proposed a mansion tax to help raise the tax threshold for the poorest. But at the last election pue manifesto stated we would maintain the threshold freeze because we’d so far not found the money to stop or reverse it, despite the many less regressive taxes we could have raised but chose not to.
And now to add insult to injury, and without conference having rescinded it as party policy our leader has announced that we are opposed to the mansion tax!
So we’ve gone from wanting to tax the rich to help the poor, to maintaining taxes on the poor to save the rich!
“And now to add insult to injury, and without conference having rescinded it as party policy our leader has announced that we are opposed to the mansion tax!”
Look at a map of Lib Dem held and potential target seats. Look at a map of where the £2 million+ houses are.
Of course he did! Post 2024 the LIb Dem cohort of MPs represent a much more coherenent set of constituencies when aligned with the party’s policy positions than perviously and its nonsensical to think that this convergence wouldn’t continue.
@Hywel what do you mean of course he did? When Ming Campbell lost his balls and decided to drop our 50p top rate policy he went to conference to approve it.
We’ve not made any subsequent change to the constitution to allow leaders to change policy unilaterally. If we let leaders get away with openly defying the party then we might as well be in the labour party.
And the number of Lib Dem seats where more than 5% would affected is between 14 and 23, of which only Maidenhead, Horsham and Chesham and Amersham come close to being vulnerable, and only if the Tories recover which they aren’t doing.
And ultimately if we opposed anything that could upset only 5-10% of voters in any number of lib dem seats then we wouldn’t have any policies at all!
We’ve never been this cowardly.
@Jenny the personal allowance is withdrawn by the level of 45% tax. The rich will lose nothing from its not being indexed.
@ Jenny,
Do the rich pay taxes in any case?
https://smartasset.com/investing/buy-borrow-die-how-the-rich-avoid-taxes
@ Peter Martin. Yes the rich do pay tax. Lot of it. Not as much as to “make the pips squeak” perhaps but then liberals are not socialists, and citizens’ money does not belong to the state.
Remember that the Royal family gets £123.1m a year from taxpayers via the Royal Estates and the Windsors are one of the wealthiest families in the world. They get shedloads from the Duchies of Lancaster and Cornwall and pay no inheritance tax either. Fair? I don’t think so.
This 2019 IFS briefing note is perhaps relevant:
The characteristics and incomes of the top 1%
What is notable is in 2019 to be in the top
0.1% of tax payers you needed an income in excess of £650,000
1%, income over £160,000
4% income over circa £80,000+.
Would be nice to have some figures for more recent years and so can do some trend analysis.
From media reports, I know some of those with such high incomes are effectively operating as self-employed businesses with employees, so probably should be converting to a recognised company entity. This merging of personal affairs with business also seems to be a consideration among non-doms. I would be interested to know more about the benefits of operating in this way, at these levels of revenues, compared to traditional company entities.
Basically, like many groups, not all will conform to the stereotype landed gentry with inherent re “old money”.
@Chris Perry, @ Jenny Smith
If I understand correctly, what is actually being advocated is to increase the personal allowance, but freeze or lower the top tax bracket threshold, so that top rate taxpayers still pay the same or slightly more tax. It has been done before, remember the 20% tax bracket that very quickly got squeezed out; begging the question of the current tax bands: 25%, 40% and 45%, which one do you wish to squeeze and ultimately remove.
Thank you for an excellent article!
Alas, our tax set up is neither fair nor transparent.
Until our tax set up is fair/equitable and transparent, our socio-ecomonic contexts will continue do be defective and deficient.
Our dishonest tax set up facilitates the growth of financialism and attacks “Social Liberalism” which brings both “Freedom to” use initiatives and drive plus “Freedom From” incresing poverty, hunger, homelessness and medical deprivation for the poor and disadvantaged.
https://www.taxresearch.org.uk/Blog/2025/11/18/does-taxing-the-wealthy-control-inflation/
In short, our tax set up is parasitic on regular citizens and their children with the beneficiaries being the wealthy and the financial people, when it could and should be symbiotic for all.
@Chris Perry
Thanks for replying but please allow me to disagree that you have answered my point appropriately. Firstly, you used the phase “The least impact will be felt by the higher earners” and not “The least impact will be felt by the highest earners”, but in your response to me you specifically use those with incomes of £125,140 – the highest category of income earners in our income tax system. There are far more higher rate income tax payers who earn less this figure than earn more than it, and all of them are most impacted by the freezing of personal allowances “in absolute terms” (quoting from my post) than those now in the 20% band of income tax. Your mention of “rising food prices hit the poor more than the rich” is true, but so would the claim “rising mortgage rates hit higher earners more than lower earners (since higher earners are more likely to have mortgages), but neither statement is directly relevant to the issue of whether the freeze on personal allowances impacts on higher income earners more or less than on lower income earners. As a statement of fact, increasing personal allowances by £100 would save a 45% income tax payers £45 but only save a 20% income tax payer £20. Therefore, not increasing personal allowances costs higher income tax payers more (apart from the small number of ‘highest’ earners over £125,140.)
@ Tristan,
“Yes the rich do pay tax. Lot of it.”
They are good at dodging it too. The Duke of Westminster didn’t pay any tax on his £9 bn inheritance.
https://www.theguardian.com/money/2016/aug/11/inheritance-tax-why-the-new-duke-of-westminster-will-not-pay-billions
@Peter, I seem to remember a few decades back the government altered the trust legislation, so as to prevent ordinary people putting their homes into trust…
This changing of the rules has also happened with respect to rental property – making it harder for you or I to run a single property, but easier if you have the capital to create a property management business and so rent out 6 or more properties…
@Jenny Smith. It is people taking in excess of £1m per year much of which is earned by people paid on the minimum wage which concerns me. I am looking for a fairer share of the income from endeavour. In respect of taxation a top threshold of £125,140 per year is set far too low in the scale of things.
@Chris – “ In respect of taxation a top threshold of £125,140 per year is set far too low in the scale of things.”
I think you didn’t mean what this implies as first reading. However, a big challenge in the current financial world is going to be not the setting of additional higher rate income tax bands, but collecting taxes.
Firstly, we have the evidence from the attempt to set a top tax rate of 50%, which was hastily reduced to 45%, because at 50% the government had incentivised a large group ie. Those earning less that circa £1m, to invest in aggressive tax avoidance schemes.
Secondly, we can look to the 1960’s, where very high tax rates (eg. The infamous 98% rate) were normal and see that the government actually had lower tax revenues than when the rates were reduced by Thatcher.
I suggest if we really want to improve the life of those on minimum wage, we need to increase the minimum wage and associated minimum pension contributions. However, we do need some way of taxing notional employees, as if AI – just another form of automation, does actually deliver (unlikely), there will be fewer employees contributing to wealth creation. The trouble we have is that having been focused on a race to the bottom of the barrel, looking up it quickly becomes clear just how far down we are and thus just how big the climb is going to be.
“Firstly, we have the evidence from the attempt to set a top tax rate of 50%, which was hastily reduced to 45%, because at 50% the government had incentivised a large group ie. Those earning less that circa £1m, to invest in aggressive tax avoidance schemes.”
It was introduced by Alistair Darling because he was ideologically in favour and abolished by George Osborne because he was ideologically against. Evidence had no part in it.
At no point was the Top Rate actually the top rate. That was and is what is referred to as “Withdrawal of Personal Allowance” and stands at 60%. Though obviously stupid, it doesn’t seem to have produced any of the catastrophic effects that some claim for high tax rates. Agressive tax avoidance schemes are generally illegal so if they are being used, it’s down to poor enforcement by HMRC.
@ Peter Martin
{the Rich] are good at dodging it too.”
Yes I recall this article in the Guardian. I very much doubt the Duke of Westminster “dodged” tax. I expect he, his trustees and his family play strictly within the rules.
You should look at taxation of UK resident discretionary trusts – probably the type of trusts from which the current and last Duke of Westminster benefitted from. Income generated by these trusts is taxed at 39.35% or 45% depending on the kind of income with (to over simplify) a tax free allowance of £500 per annum.
Disposal of trust assets are subject to capital gains tax in the usual way.
In addition, the capital value of a discretionary trust is subject to a tax of 6% of its value every 10 years subject to the exemptions from inheritance tax individuals get.
Again to grossly over simply, the trustees of the trusts effectively pay the tax on behalf of the beneficiaries. My guess is that current policy is to make the overall tax take broadly in line with the tax on individuals but penalising inherited wealth a bit. (Almost all UK new trusts are now set up on death – it’s highly tax inefficient to set them up during the settlor’s life so people don’t do it.