We were recently asked to share a copy of this handout comparing welfare with ‘handouts for the rich’.
Download the original document here: Handouts for the rich
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Handouts for the rich, cuts for the poor
More than 5 million people in the UK earn less than the living wage. Most of these people depend on Housing Benefit, Child Benefit or Working Tax Credit to survive. The state has been paying about £4 billion a year to top up the incomes of low earners – a sum that could be halved if employers paid the living wage. Instead, 7 million working households have had their benefits and tax credits cut.
The Housing Benefit cuts have been savage. This is not just a problem for London e.g. on average almost 7,000 private tenants in Bristol lost £27.84 pw, single people under age 35 lost £41.60 pw and very large families lost £148.61 pw.
Childcare tax breaks
The Chancellor announced childcare tax breaks for all working families of up to £2,000 pa per child. This will be available to working couples where both parents earn less than £150,000 pa.
Why should any basic rate tax payer subsidise those who are earning up to £300,000 pa?
Help to Buy mortgage guarantees
This scheme enables home movers and first time buyers to buy an existing or new-build home costing up to £600,000 with only a 5% deposit, while the government guarantees the lender up to 15% of the property price. There is no limit on the buyer’s level of income, so this is a really good deal not only for first time buyers but also affluent home owners wanting to move up the property ladder.
The institute of Directors have labelled this scheme as “mad” and “dangerous”, because it increases demand and prices by under-writing £130 billion of mortgage lending with state money, while the urgent need is to increase the supply of housing.
When the average house price in England is around £260,000, why should any basic rate taxpayer subsidise those who want to buy properties costing up to £600,000?
Buy-to-let mortgage tax breaks
Private landlords with buy-to-let mortgages can reduce their income tax by offsetting the mortgage interest against the rent. (Private homeowners no longer receive tax relief on mortgage interest). For example, a landlord with a £150,000 interest-only mortgage at a 5% interest rate can set the monthly mortgage payment of £625 against rental income of £1,000 and only pay tax on £375 pm – and there are other ways in which private landlords can arrange their finances to pay hardly any tax.
The Intergenerational Foundation regards these tax breaks as an “upper middle class perk” which has resulted in a loss of revenue of up to £5.2 billion pa. Allowing individuals to withdraw their entire pension savings could increase the buy-to-let boom and may lead to a crash in property prices.
How can we allow this to continue when average private rents are higher than average mortgage payments and a generation of young people are being priced out of both home ownership and private renting?
Prepared by Hilary Saunders, Chair of Bristol Poverty Action