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Hunt to unveil spending cuts, tax rises

Chancellor and Prime Minister will have to answer a financial “black hole” that could be as large as £60bn – which may require up to £35bn of spending cuts and an extra £25bn raised through taxation…reports Asian Lite News

Jeremy Hunt will unveil his autumn statement on Thursday, where he will attempt to find up to £60bn from a combination of tax hikes and spending cuts to rebalance the books.

Both the chancellor and Prime Minister Rishi Sunak have warned that “difficult decisions” will need to be made in order to restore the UK’s economic credibility.

But speculation continues about what exact measures will form the autumn statement.

A report from the Resolution Foundation economic think tank has suggested Sunak and Hunt face a thankless task to rebalance the nation’s finances, with at least £40bn needing to be found by the government.

Treasury sources said the financial “black hole” could be as large as £60bn – which may require up to £35bn of spending cuts and an extra £25bn raised through taxation.

Minimum wage

Britain has a legal minimum wage which all firms should pay and all workers should receive which goes up every April.

With the cost of living soaring, there have been calls for the government to increase the minimum wage – officially known as the National Living Wage – by more than was planned in the autumn statement.

At present, the National Living Wage for over-23s is £9.50 an hour, for those aged 21-22 it is £9.18, for those aged 18-20 it is £6.83 and for those under-18 or apprentices it is £4.81.

The rates are the same across all parts of the UK.

Hunt will announce a rise in the National Living Wage for over-23s from £9.50 an hour to about £10.40 an hour.

The rise of nearly 10% would benefit around 2.5 million people, the original report in The Times said.

The newspaper also reports that eight million households will receive cost of living payments worth up to £1,100 a year.

Council tax

The Daily Telegraph has reported the government is also considering removing the requirement for local authorities to hold a referendum before increasing council tax by more than 2.99%, allowing them to raise significantly more money.

The new threshold could be 5%, according to the newspaper, which would see households in Band D paying up to £100 extra.

It could also mean that average council tax bills exceed £2,000 a year for the first time.

Under present rules, councils responsible for social care are allowed to increase their bills by 2.99%, including a 1% levy for social care.

If a local authority wants to raise bills any further, it must hold a local referendum.

But under new plans expected to be unveiled in the autumn statement, the maximum amount councils can increase bills without holding a referendum is expected to rise to 4.99% to help pay for social care.

Most councils are expected to take advantage of the freedom to charge residents more.

The Conservative Party manifesto in 2019 pledged to keep a veto on large council tax rises, insisting local people would “continue to have the final say”.

But a Treasury source told the Telegraph that councils need “more flexibility” to raise money.

The Telegraph has also suggested that the chancellor is considering plans to reduce the amount of funding received by councils for some of the services for refugees hosted by UK families.

Freezing tax thresholds

In the 2021 spring budget, Sunak, who was chancellor at the time, froze personal tax thresholds, which meant more low-income households had to pay the basic rate of income tax while those with earnings nearing £50,000 were made to pay the higher 40% rate.

The freezes were at the time forecast to last five years and raise billions for the Treasury by 2026, but it is thought this could be extended to 2028.

The Conservative Party’s winning 2019 manifesto promised to keep taxes low, so prolonging the freeze in the threshold at which workers start paying taxes is politically delicate ground for Mr Sunak’s government

However, it would send a signal the UK is committed to balancing its books over the long term.

Income tax

As chancellor, Sunak also promised to cut the basic rate of income tax to 19% in April 2024 and then to gradually reduce it to 16% by 2029.

While Truss’s government had said it would cut 1p of the basic rate of income tax from April 2023 – given the great need to cut the country’s debt, it is unclear whether or not this will be a pledge that is kept.

The Telegraph newspaper has suggested Hunt is planning on reverting to Sunak’s initial policy and planning a delay in the cut to the basic rate of income tax until 2024.

The cut could be completely off the table, however the Conservative Party’s commitment to keeping taxes low where possible suggests this is a less likely outcome.

The paper has also reported that ministers have discussed slashing the rate of income tax relief that is applied to higher rate taxpayers from 40p to 20p – which would mean millions of higher rate taxpayers could face paying more income tax.

Officials are also said to have discussed raising the top rate of income tax – which was 50p until it was abolished by former chancellor George Osborne in 2013.

But this is believed to be a less likely path for Sunak and Hunt to choose to go down.

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Hunt Hints ‘Tax Pains’ Ahead For All

The chancellor said his plan will help get the UK out of a recession as quickly and with as little pain as possible as he also promised help for energy bills not just this winter, but next…reports Asian Lite News

Jeremy Hunt has said everyone is going to be paying higher taxes but those who earn the most will have to make larger sacrifices.

The chancellor said during Thursday’s autumn statement he “will be asking everyone for sacrifices” but recognises there is “only so much we can ask” from people on the lowest incomes.

“That will be reflected in the decisions that I take, that’s important because Britain is a decent country, a fair country, a compassionate country,” Mr Hunt said.

“We’re all going to be paying a bit more tax, I’m afraid.”

Ministers are understood to be considering lowering the threshold at which employees pay the highest 45p rate of income tax from £150,000 to £125,000, the Sunday Telegraph reports.

Nurses across the UK this week voted to go on strike for the first time, likely next month, as they demand a 17% pay rise.

Hunt, who was health secretary when junior doctors went on strike for the first time in 2015, said he was “very conscious” of nurses’ concerns and understands they are asking for that above-inflation increase because of the impact of inflation on their pay packet.

But he said: “I think we have to recognise a difficult truth that if we gave everyone inflation-proof pay rises, inflation would stay. We wouldn’t bring down inflation.

“And that’s why, you know, I’m not pretending there aren’t some difficult decisions. The way through this is to bring down inflation as quickly as possible, because that is the root cause of your concern, your anger, your frustration, that your pay isn’t going as far as it might.”

Hunt promised the autumn statement will “not just be bad news” but said he believes the public recognises “if you want to give people confidence about the future you have to be honest about the present”.

He said his plan will be both short and long-term and will bring down inflation, control high energy prices and “get our way back to growing, healthily”.

The chancellor said his plan will help get the UK out of a recession as quickly and with as little pain as possible as he also promised help for energy bills not just this winter, but next.

But he also said spending cuts from government departments will be needed and hinted no more funding will be given to the NHS.

He said the health service’s funding is already going up but the government needs to do “everything we can to find efficiencies” within the NHS.

Hunt, asked if the NHS is on the brink of collapse, admitted doctors and nurses “on the frontline are frankly under unbearable pressure so I do recognise the picture”.

He added that public services need a strong economy but that applies the other way around as well.

And he said the NHS can help get the UK out of the current economic difficulties, such as helping the growing number of people out of work due to long-term sickness.

Simon Clarke, the former levelling up secretary under Liz Truss, told Sophy Ridge on Sunday he would rather see public spending cuts than tax rises in the fiscal statement.

He said: “I would strongly urge that the great balance of this statement should come from spending reductions because I really do think that there is an issue with our raising the burden of taxation on Britain at this time.”

Clarke added that government spending has risen “substantially” over the past decade so there is “potential” to make savings that “did not damage public services”.

https://www.youtube.com/watch?v=Npmjlue23TA

Labour’s shadow chancellor Rachel Reeves said the chancellor could still make “fair choices” in the autumn statement that do not place the burden on the public by closing tax loopholes and backdating the windfall tax on energy companies’ profits to January and extending it by two years.

She said the windfall tax extension could raise an additional £50bn.

Reeves also called for a general election as she said Prime Minister Rishi Sunak has “no mandate for the cuts and tax increases” because he was not voted in by the country, but by Conservative MPs.

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Hunt plans £10 billion tax rule changes

Jeremy Hunt

Increasing the number of very high earners whose income relief is cut further is another option being considered, the report said…reports Asian Lite News

Chancellor Jeremy Hunt is considering changing income tax rules which are designed to encourage workers to save into their pension pots, the Telegraph reported.

Talks are underway to reduce the rate at which income tax relief is applied to Britain’s higher-rate taxpayers from 40 pence to as low as 20 pence, according to the Telegraph. Increasing the number of very high earners whose income relief is cut further is another option being considered, the report said.

The total cost of pension tax relief to the Exchequer is £42.7 billion, of which £22.9 billion is relief on income tax. A flat rate of 20% would raise between £8 billion to £10 billion a year, according to a report by the Pension and Lifetime Savings Association.

It marks the resurrection of a plan first pitched by former chancellor George Osborne in 2016, which was abandoned by the Conservative Party. The Telegraph last week reported that Osborne had been approached by Hunt for advice on how to handle Britain’s economy.

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Britain faces tax rises, spending cuts

Sunak is also said to be considering freezing international aid for two years and cutting investment spending…reports Asian Lite News

Everyone in the country will need to pay more in tax in the coming years to fix a hole in public finances, a source in the finance ministry said on Monday, following a meeting between Prime Minister Rishi Sunak and finance minister Jeremy Hunt.

Hunt is due to present a fiscal statement on Nov. 17 which will be accompanied by the first growth and borrowing forecasts since March from Britain’s Office for Budget Responsibility.

“It is going to be rough. The truth is that everybody will need to contribute more in tax if we are to maintain public services,” a Treasury source said.

“After borrowing hundreds of billions of pounds through COVID-19 and implementing massive energy bills support, we won’t be able to fill the fiscal black hole through spending cuts alone,” the source added.

Sterling fell to a record low against the U.S. dollar and the Bank of England was forced to intervene in the bond market in the days after Hunt’s predecessor Kwasi Kwarteng set out 45 billion pounds of unfunded tax cuts on Sept. 23.

The debacle led to Liz Truss resigning as prime minister and being succeeded by Sunak, who had earlier lost out to her in August’s Conservative Party leadership election, partly because he was less keen to promise immediate tax cuts.

Britain’s economic prospects have dimmed since March due to surging inflation, weaker growth and higher borrowing costs.

Economists estimate the government will still have to find tens of billions of pounds of savings or tax rises over the medium term to keep the public finances on an even keel, even if Truss and Kwarteng’s tax cuts are fully reversed.

A Treasury source did not put a figure on what they called “the fiscal black hole”, but the BBC has previously been told it may need to be at least £50bn.

“It is going to be rough,” the source said. “The truth is that everybody will need to contribute more in tax if we are to maintain public services.”

The source said, given the scale of borrowing for energy bills support and the Covid-19 pandemic, “we won’t be able to fill the fiscal black hole through spending cuts alone”.

The Treasury said: “Given the eyewatering size of the fiscal black hole, the PM and the Chancellor agreed that tough decisions are needed on tax rises, as well as on spending.”

Few concrete details of the government’s plans have emerged, but a Treasury source told the Daily Telegraph that Hunt is planning to fill the budgetary shortfall through a combination of 50% tax rises and 50% cuts to public spending.

While the Treasury said Hunt and Sunak “agreed on the principle that those with the broadest shoulders should be asked to bear the greatest burden,” it warned that “given the enormity of the challenge, it is inevitable that everybody would need to contribute more in tax in the years ahead”.

The government has sought to brace the public for the impending change of direction. As he entered Downing Street last week, Mr Sunak warned the public that a “profound economic challenge” lay ahead in the coming months.

And last month, Hunt said the government would have to take decisions of “eye-watering” difficulty to restore faith in public finances.

The size of the fiscal shortfall has shrunk slightly since Hunt reversed most of the measures introduced by former Prime Minister Liz Truss in her September mini-budget. At the time, the Institute for Fiscal Studies estimated the shortfall could be as much as £62bn.

The government had delayed Hunt’s fiscal statement until 17 November in the hope that the economic outlook would improve.

Despite this, the Office for Budget Responsibility (OBR) could still predict a recession next year, with GDP forecasts cut by up to 4% by the end of 2024.

Other measures reportedly under consideration by the government include ending the pensions triple lock and stopping benefits rising with inflation, moves which could save the government up to £9bn.

But increases to the rates of income tax, National Insurance and VAT are understood to have been ruled out by the pair.

In a new report, the Resolution Foundation think tank predicted that many of the options facing the government would be “unpalatable”, as more people could be pushed into the higher 40% rate of tax in a bid to make up the shortfall.

Sunak is also said to be considering freezing international aid for two years and cutting investment spending.

But analysts have already warned that there remains little scope for further cuts to public spending after years of austerity under Conservative governments.

Such moves could also cause Sunak considerable political headaches. His Defence Secretary Ben Wallace – who is widely popular with Conservative Party activists – has already threatened to resign if defence spending doesn’t rise to 3% of GDP.

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Truss rules out new taxes

Truss, who is the bookmakers’ favorite to succeed Boris Johnson, made the commitments at the Conservative Party leadership hustings in London, ahead of the victor being announced on Monday…reports Asian Lite News

Liz Truss ruled out introducing any new taxes or rationing energy this winter if she becomes the UK’s next prime minister, making two eye-catching pledges in her final pitch to win the post.

Truss, who is the bookmakers’ favorite to succeed Boris Johnson, made the commitments at the last Conservative Party leadership hustings in London on Wednesday, ahead of the victor being announced Sept 5.

Truss was asked if she’d make a “read my lips” promise not to raise taxes in government, a reference to a famous pledge made — and then broken — by former US President George H. W. Bush. She replied: “Yes. No new taxes.” She specifically ruled out introducing any new windfall taxes on the energy sector.

Should she win the race for 10 Downing Street, Truss will have to confront a looming economic crisis in Britain, with households facing a record squeeze on the cost of living amid a surge in energy prices. Truss is planning an emergency mini-budget within her first month in office but is yet to detail an extensive plan for how she’d ease the pain.

Britons are set for the biggest squeeze on their living standards in a century unless the next prime minister delivers tens of billions of pounds of extra support, according to new analysis published by the Resolution Foundation think tank on Thursday.

“If the government does want to substantially cut the price of energy faced by households, then it should look to offset some of the cost with increases in taxes, particularly on better-off households,” Resolution Foundation Chief Economist Mike Brewer told Bloomberg Radio on Thursday.

Truss’s opposition to a further windfall tax on extraordinary profits linked to high gas prices caused by Russia’s war in Ukraine may come under pressure in the coming months. The UK Treasury forecasts as much as £170 billion of profit for gas producers and electricity generators over the next two years, according to a person familiar with the matter. Johnson’s Tories introduced an initial 25% levy on the profits of oil and gas firms in May after months of pressure from the opposition Labour Party.

Labour is arguing for a freeze on energy bills in the UK this winter, funded by an expanded windfall tax. Without new taxes, Truss will need to lean on extra government borrowing or cuts to spending elsewhere to finance further household support. Former Bank of England Deputy Governor Charlie Bean said Wednesday that investors are starting to see UK assets as more risky because of signals coming from Truss about her plans to cut taxes and raise spending.

The UK government is also planning to offer fixed-price contracts to more renewable-energy producers as a way to cap profits without imposing a windfall tax, people familiar with the plans told Bloomberg.

And even as the British government works on contingency planning to secure energy supplies for the winter — under a worst-case scenario officials predict blackouts — Truss ruled out the prospect of needing to ration energy, without giving further details. Her leadership rival, Rishi Sunak, said nothing could be ruled out.

“Many European countries are looking at how we can all optimize our energy usage,” Sunak said at the hustings at Wembley Arena in London. “That is a sensible thing for us to be doing as a country.”

Truss also signaled that she would look at reforming business rates, a form of property tax on commercial premises. Bloomberg reported Wednesday afternoon that she was weighing a cut to rates.

The winner of the Conservative Party leadership race will be announced on Monday and they will formally become prime minister after seeing the Queen on Tuesday.

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Sunak vows 20% cut to income tax  

Sunak said the plan would mark the biggest income tax cut since the time of Margaret Thatcher…reports Asian Lite News

Rishi Sunak, trailing in the race to become Britain’s next prime minister, has vowed to slash the basic rate of income tax by 20 per cent by 2029 in a potentially make-or-break throw of the dice by the former finance minister.

Sunak, once seen as the favourite to replace Boris Johnson when he helped to steer the economy through the ravages of the Covid-19 pandemic, has struggled against his rival, Foreign Secretary Liz Truss, who has pledged immediate tax cuts.

The bruising race between Sunak and Truss to become Britain’s next prime minister stepped up a gear on Monday (Aug 1) with the mailing out of ballots to Conservative party members.

Sunak said he remained focused on tackling inflation but once that was achieved he would follow through on an already-announced plan to take 1 pence (S$16.90) off income tax in 2024, and then take a further 3 pence off by the end of the next parliament, likely around 2029.

The two pledges would take income tax from 20p to 16p.

Sunak said the plan would mark the biggest income tax cut since the time of Margaret Thatcher.

“It is a radical vision but it is also a realistic one,” he said in a statement on Sunday (July 31).

Britain’s hunt for a new prime minister was triggered on July 7 when Johnson was forced to announce his resignation following months of scandal. Conservative lawmakers have whittled a field of candidates down to Truss and Sunak, with an announcement of the decision by party members due on Sept. 5.

With inflation surging to a 40-year high of 9.4 per cent and growth stalling, the economy dominated early stages of the contest.

Sunak, who steered the UK economy through the pandemic, said Truss’ plans were “fantasy economics” that would fuel inflation and heap further strain on public finances struggling to recover from the pandemic.

Sunak said each penny cut from the rate of income tax would cost around 6 billion pounds (S$10.1 billion) a year, a figure that he said would still allow Britain’s debt-to-GDP ratio to fall, if the economy grows in line with official forecasts.

Truss has argued that tax cuts are needed now to give the economy a shot in the arm. A recent poll by YouGov showed Truss held a 24-point lead over Sunak among Conservative Party members.

Trailing in polls with the all-important party members, Sunak last week performed a significant U-turn by announcing a plan to scrap VAT on energy bills.

He also promised grassroot Tories over the weekend that he would stop “woke nonsense” and “end the brainwashing” if he becomes prime minister, although added he has “zero interest in fighting a so-called culture war”.

The 42-year-old also unveiled plans to revive the country’s ailing town centres.

“I want to slash the number of empty shops by 2025 and make sure that they are turned into thriving local assets,” he said.

“I will also crack down on anti-social behaviour, graffiti and littering – through extended police powers and increased fines.”

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Low tax regime another curse to Lankan economy

Sri Lanka’s economic outlook remains vulnerable to unprecedented inflationary pressures as massive debt overhangs have significant adverse spillover effects on the economy…reports Asian Lite News

Due to the introduction of a low tax regime in 2019 followed by the impact of COVID-19 on the country’s revenue, Sri Lanka’s economic outlook continues to be in a vulnerable state as the Island nation is facing the worst economic meltdown in its history.

Sri Lanka introduced a low tax regime in late 2019 and the reforms included the reduction of tax rates of Value Added Tax (VAT), Personal Income Tax (PIT), and Corporate Income Tax (CIT), and narrowing tax bases of VAT and PIT, while introducing a plethora of tax incentives, such as tax exemptions for agriculture and Information Technology (IT) and enabled services, tax deductions and tax holidays resulting in an annual loss of around LKR 600 billion – 800 billion in tax revenue to state coffers, stated the Press Release.

The low tax regime, the impact of the COVID-19 pandemic on revenue mobilization, together with the pandemic relief measures, widened the budget deficit significantly to 11.1 per cent of GDP in 2020 and 12.2 per cent of GDP in 2021 from 9.6 per cent of GDP in 2019 and led to an increase in the government debt to GDP ratio to 100.6 per cent in 2020 and 104.6 per cent in 2021 from 86.9 per cent in 2019.

Therefore, these reforms are now being looked at as policies that led to a significant loss of government revenue, partly due to the spread of the COVID-19 pandemic in 2020/2021 and related developments, which affected the revenue generation process, ultimately resulting in the lowest revenue to GDP ratio in the region.

According to the official report, the fiscal imbalance has significant adverse spillover effects on the economy. Sri Lanka’s economic outlook remains vulnerable to unprecedented inflationary pressures as massive debt overhangs have significant adverse spillover effects on the economy.

The loss of access to international markets and the relatively low amount of other foreign exchange inflows to the government have created substantial issues in financing the government budget deficit.

In 2020 and 2021, the entire budget deficit was financed through domestic sources as there were net repayments to the foreign sources. Of the domestic sources to finance the budget deficit, the majority was obtained from the banking sources, particularly from the Central Bank of Sri Lanka. A continuous significant amount of Central Bank monetary financing has adversely affected the economy, particularly with the significant pressure on the inflation and the exchange rate.

At present, the situation has aggravated to a very critical level where the General Treasury has to increasingly obtain Central Bank financing to make the government expenditures, including a substantial part of interest, salaries and wages, pensions and Samurdhi payments etc. This is clearly unsustainable and hence the implementation of a strong fiscal consolidation plan is imperative through revenue enhancement as well as expenditure rationalization measures in 2022 and beyond to ensure macroeconomic stability to support the medium to long-term economic growth objectives of the country, the press release said. (ANI)

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Taxing times for Sunak

In a letter to PM Boris Johnson published, Sunak said he wants a probe by the government’s adviser on ministerial standards to help ensure the public “retain confidence in the answers they are given.”

Rishi Sunak asked for a formal review into whether he properly declared his financial interests, as the UK Chancellor of the Exchequer tries to defuse a row over his tax affairs that threatens to derail his career.

In a letter to Prime Minister Boris Johnson published late Sunday, Sunak said he wants a probe by the government’s adviser on ministerial standards to help ensure the public “retain confidence in the answers they are given.”

The move comes as he faces intense pressure to lay out the details of his and his family’s financial arrangements. It emerged last week his millionaire wife, Akshata Murthy, holds non-domicile status and was not paying UK taxes on her overseas income and the chancellor held a US green card — proof of permanent residency — which he only gave up more than a year and a half into his current role.

The opposition Labour Party said it wrote to Johnson and the standards adviser earlier Sunday demanding a probe into whether ministerial rules had been broken. “A fish rots from the head, Labour’s deputy leader Angela Rayner said in an emailed statement. “It is the prime minister’s responsibility to bring this debacle to a close by ensuring that standards are upheld across his cabinet.”

The furore compounds the problems facing Sunak, whose popularity has slumped since he was accused of not doing enough to help Britons facing a record slump in living standards. In a mini-budget last month, he went ahead with a levy increase to fund health care and rejected calls to boost welfare payments.

The country’s tax burden now at its highest level since the 1950s, so the backlash when it was revealed Murthy holds so-called non-domicile status — allowing her to not pay British tax on overseas income — was inevitable.

Though she said late Friday she would no longer take advantage of that rule and would now pay UK taxes on her foreign earnings, it is unlikely the scrutiny will fade. Together with the revelation about Sunak’s green card, the reports have fueled the perception the family is not committed to Britain.

By requesting an inquiry, Sunak wants the findings to help draw a line under the issue. But it also carries the risk of keeping the focus on his financial arrangements. Labour is asking if the chancellor has taken advantage of tax havens and demanding “full transparency” on where the family pays taxes.

“I have always followed the rules and I hope such a review will provide further clarity,” Sunak said on Twitter where he posted the letter to Johnson.

Outstanding job

PM Johnson has so far defended Sunak, telling reporters on Friday the chancellor is doing an “outstanding job” — though he also said he had not been aware of Murthy’s tax status.

The fallout illustrates the dramatic turnaround in their fortunes. Just weeks ago Johnson was clinging to power, with members of his Conservative Party threatening to oust him over allegations of rule-breaking parties during the pandemic. At the time, Mr Sunak was seen as Johnson’s most likely successor.

Boris Johnson hosts the Prime Ministers Business Council alongside the Rishi Sunak, Chancellor of the Exchequer and leading business figures in 10 Downing Street. Picture by Simon Dawson / No 10 Downing Street

That was before Russia’s invasion of Ukraine. Since then, Johnson’s personal approval ratings have recovered and several Tory MPs have said an international crisis is not the time for a leadership change.

Now the question is whether PM Johnson keeps Sunak in the role, as some Tories speculate about a change in chancellor during a ministerial shuffle in the coming months.

Different views

The country’s two most powerful politicians have very different economic approaches, with Johnson more inclined toward spending on big infrastructure projects and the chancellor — the tax rises on his watch not withstanding — styling himself as a low-tax, fiscal conservative.

Sunak’s slumping popularity helps solidify Johnson’s position by removing an obvious challenger, but it also carries big risks. The reports about the chancellor’s wealth and his family’s tax affairs play into Labour’s regular attack on the Tories, that “it is one rule for them and another for the rest of us.”

Local elections in London and across much of the UK on May 5, therefore, loom large for PM Johnson, Sunak and the Tories — especially if the cost-of-living crisis hits support for the party.

“Today I have written to the Prime Minister asking him to refer my ministerial declarations to the Independent Advisor on Ministers’ Interests. I have always followed the rules and I hope such a review will provide further clarity,” he tweeted.

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One in five top bankers gained from ‘non-dom’ tax status

Pound (Wikipedia)

The top three nationalities for non-doms in 2018 were the United States, India and France, and 93% were born outside the United Kingdom…reports Asian Lite News

More than one in five bankers earning at least £125,000 pounds a year in Britain have benefited from non-domiciled tax status, as have many high-paid workers in other sectors, a study showed on Thursday.

Non-dom status – which exempts more than 75,000 mostly foreign nationals in Britain from tax on overseas income – has raised questions about the fairness of the tax system, as it overwhelmingly benefits the very rich.

The research from the University of Warwick and the London School of Economics showed that just 0.3% of British taxpayers earning under 100,000 pounds in 2018 had claimed non-dom status at some point in the past 20 years. By contrast, 27% of taxpayers earning 1-2 million pounds had done so.

Two in five top earners in the oil industry, one in four car industry executives and one in six top-earning sports and film stars also benefited from the status.

Non-dom status is only available to British residents who claim that their ‘domicile’ – the centre of their personal and financial interests – is outside the United Kingdom.

People walk on Westminster Bridge in the mist in London, Britian. (Photo by Stephen ChungXinhuaIANS)

The top three nationalities for non-doms in 2018 were the United States, India and France, and 93% were born outside the United Kingdom.

Non-doms were most likely to live in central London and around 80% of them reported their main source of income was from employment or a pension, while 20% lived off investment income or other overseas earnings.

“A significant minority of non-doms do appear to be the ‘rentier rich’,” the report said.

The research is based on anonymised individual tax data from 1997 to 2018 provided by Britain’s revenue office.

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Sunak resists rise in defence spending

Chancellor of the Exchequer Rishi Sunak on his way to brief members of the cabinet at the weekly Cabinet meeting inside No10 Downing Street, on the day the Chancellor delivers his summer statement to the House during the coronavirus. Picture by Andrew Parsons / No 10 Downing Street

The chancellor said he had already allocated a £24bn cash increase for military spending over four years, while allies said his spring statement was not a moment to announce more, reports Asian Lite News

Rishi Sunak is resisting pressure for a big increase in defence spending this week in the wake of Russia’s invasion of Ukraine, as he attempts to free up money for cuts in fuel duty and taxes to ease the crisis in the cost of living.

Sunak has told ministers he is turning off the spending taps and they will have to make do with the money they have got, ordering a search for £5.5bn of efficiency savings.

He has vowed to cut taxes but has warned that reductions must be funded by controlling public spending. Sunak’s allies believe the defence and health budgets are particularly badly managed.

The chancellor said on Sunday he had already allocated a £24bn cash increase for military spending over four years, while allies said his spring statement on Wednesday was not a moment to announce more.

“This is not a spending review,” said one ally of the chancellor. Sunak told the Mail on Sunday: “Let’s not be spending any more money — let’s make sure the money we’re spending is spent really well.”

Sunak argued that he increased the military budget before the Russian invasion of Ukraine, telling the BBC’s Sunday Morning programme that was “a good thing”.

He insisted the government’s integrated defence and foreign policy review last year recognised the Russian threat, although critics claim the document was overly preoccupied with a “tilt to the Asia-Pacific”.

With Sunak attempting to hold down public spending, he is expected to use his spring statement to start mitigating cost-of-living pressures, as households confront soaring energy prices and rising inflation.

The chancellor said he would help families struggling with the cost of living when he presents updated economic forecasts on Wednesday, saying: “Where we can make a difference, of course we will.”

Sunak admitted that energy prices were “the number one priority” for people at the moment and that, as MP for the rural Yorkshire constituency of Richmond, he knew fuel prices were “a big issue”.

“It’s something that’s challenging to families, I get that,” he said, hinting at fuel duty cuts. He said his policy was to take “targeted action where we think there is most acute pressure”.

Sunak is under pressure to go further and cut taxes more generally, and said they would come down “over time”. He blamed the pandemic for the fact Britain has its highest overall tax burden since the 1950s.

But he refused to say whether he would cut income tax or change the threshold for the payment of national insurance in the spring statement, as many Tory MPs would like.

The chancellor said his priority was to cut taxes over the rest of the parliament, after analysis showed he had raised taxes more in two years than Gordon Brown, former Labour chancellor, did in a decade.

Sunak insisted that Brown had not had to contend with a pandemic, but his credibility with Conservative MPs now rests on his ability to control spending and push down taxes before the election.

The Labour party is calling for a reversal of the £12bn national insurance rise, which Sunak insisted would go ahead in April to help fund the NHS and deal with a treatment backlog. Labour also wants a windfall tax on North Sea oil companies.

Rachel Reeves, shadow chancellor, said it was about time Sunak lived up to his rhetoric about wanting to cut taxes and said Labour would not “stand in the way” if he decided to cut fuel duty by 5p a litre.

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