Welsh Tories propose tax cut for the wealthy


The Welsh Conservatives have mirrored their colleagues in Westminster by calling for tax cuts for the very highest earners if and when the Assembly in Cardiff gains the power to set income tax.

Wales-toriesIn its first report published in November, the Silk Commission into the future powers of Wales’ devolved institutions called for a referendum on devolving power over income tax to the Assembly.

Just last month the Welsh Liberal Democrats proposed cutting the basic rate of income tax from 20p to 18p, which they argue would cost around £360m whilst giving the average worker an extra £750 a year.

Writing at the time for the Institute for Welsh Affairs, the party’s leader, Kirsty Williams, declared:

“My party will remain committed to reducing the tax burden for those on average income and restructuring the tax system so it delivers both a fairer society and a stronger economy.”

In stark contrast, however, the Welsh Conservatives have now proposed an as yet unspecified tax cut for the highest earners paying tax at the 40% rate.

Speaking in Cardiff yesterday, the party’s leader, Andrew RT Davies, explained:

“Tax is one of the most important levers that any government has at its disposal. And with income tax being the most important, its devolution as recommended by an independent commission is a real game changer.”

He continued:

“If some elements of income tax are devolved, it would in my view be necessary to look at a period of reduced taxation for the entrepreneurial, whether private or public sector – those paying the 40% tax rate.

“This would not only send out a strong sign to business in competing regions of the UK, but it would spell out that Wales is well and truly open for business.”

The BBC has estimated that a 1p cut in the 40p rate, paid by around 120,000 people in Wales would cost between £12m and £16m a year.

The proposal for a tax break for more wealthy Welsh earners comes just a week after ministers in Cardiff outlined that ConDem welfare reforms will reduce total benefit and tax credit entitlements in Wales by around £590 million in 2014-15, equivalent to around £7.26 per family per week on average, roughly 1.5% of their net income.

Responding to the announcement, Plaid Cymru leader Leanne Wood concluded that it made a mockery, once again, of the chancellor’s declaration that we are all in it together.

Referring to the recent downgrade in the country’s credit rating, she explained:

“The Conservatives have shown once again how out of touch they are – the timing of this announcement couldn’t be worse.

“Only days after the Tories succeed in losing the UK’s AAA credit rating, leaving their economic and financial credibility in ruin, they are now talking about cutting taxes for our highest earners.

“This move makes no sense while their ‘austerity drive’ already inflicts devastating cuts to jobs and services – even though only 26% of their planned revenue spending cuts have been implemented to date,” she said.

“In April they will be cutting the top rate of tax from 50% to 45% for the most wealthy. It makes a joke of the phrase: ‘we’re all in this together’.”

Shadow Welsh secretary, Owen Smith, was equally dismissive of the Conservative suggestion.

“This is a half-baked plan that won’t help the Tories’ credibility following the humiliating loss of Britain’s AAA credit rating this weekend.”

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  • Mr Reasonable

    Golly, how surprising.

  • Newsbot9

    Yea. Next up – Water is wet!

  • Ash

    The ‘median wage’ for a high earner, defined as someone in the top quintile of earners, is £50,500. (That’s the income at the 90th percentile point.)

    Cut the 40p rate of tax to 38p and that typical high earner sees their tax bill fall by around £160 (2% of c. £8,000 of income above the higher-rate threshold). Cut the 20p rate to 18p and every single higher-rate taxpayer would see their bill fall by £640 (2% of c. £32,000 of income between the personal allowance and the higher rate threshold).

    Remind me again who is proposing big tax cuts for high earners?

    OK, cuts to the 20p rate would *also* benefit average earners. But not to anything like the extent the Lib Dems are suggesting. A median earner on c. £21,000 a year only stands to gain c. £220 a year from that same tax cut. (The Lib Dems’ £750 figure is absurd; it must refer, I think, to the total tax cut received by a household that includes two mean earners and therefore has a total income close to £60,000. That’s not an ‘average income’ household in any meaningful sense.)

    Income tax cuts, even to the basic rate, target better-off households by their nature: the more people are earning and the higher their wages, the bigger the tax cuts they receive. It would be cheaper and more effective to protect tax credits or other benefits that actually target low and middle income households, thereby reducing their net tax burden.

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