The region that will benefit the most from Liz Truss’s tax cuts

The Chancellor of the Exchequer Kwasi Kwarteng speaks during the Government's Growth Plan statement at the House of Commons, in London, Britain, September 23, 2022. UK Parliament/Jessica Taylor/Handout via REUTERS    THIS IMAGE HAS BEEN SUPPLIED BY A THIRD PARTY. MANDATORY CREDIT.  IMAGE MUST NOT BE ALTERED.
Kwasi Kwarteng has said cutting tax for the wealthiest will stimulate economic growth. (Reuters) (Handout . / reuters)

Kwasi Kwarteng's mini-budget is set to benefit areas in London and the South East the most, a leading think-tank has warned, threatening the government's pledges on levelling-up.

The chancellor announced the steepest tax cuts since the 1970s on Friday, claiming they are crucial to stimulate economic growth.

"We promised to prioritise growth, said Kwarteng. "We promised a new approach for a new era. We promised to release the enormous potential of this country. Our growth plan has delivered all those promises and more."

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However, the announcements immediately sparked fierce backlash for handing the UK's wealthiest households huge tax cuts while comparatively extremely little for those on the lowest incomes.

Money Saving Expert Martin Lewis described the budget as helping "mega earners"; workers on £1m per year are set to get a £55,000 tax cut in 2023/24.

The progressive IPPR think-tank has now warned that not only will the tax cuts announced today result in the richest 10% of the population receiving 48% of the gains - the poorest 10% will see less than 1% of the financial benefit.

They also pointed out that the tax cuts will also benefit those in London and the South East the most, with Londoners seeing more than double the benefit compared to households in Northern Ireland.

Average growth in household income from changes to National Insurance and income tax for 2023/24. (IPPR)

Northern Ireland is set to face the smallest cash boost from decreased taxes at 1.4%; the North East and Wales are close behind at 1.6% each.

The South West is set to benefit by 1.7% - with the East Midlands, North West, and the West Midlands benefitting by 1.8%.

In contrast, London is set to benefit by 3%, followed by the South East at 2.6%.

The challenging context for the Conservatives is that they won the 2019 election on a manifesto of "levelling-up" the country - a key part of Boris Johnson's landslide win.

Senior economist at IPPR Henry Parks described the budget as "staggeringly out of touch" and a "maxi-boost for the richest".

"As the country grapples with a cost-of-living crisis, soaring energy bills and high levels of inflation, tax cuts for millionaires should not be the priority," said Parks.

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“Worryingly, these cuts will also undermine the levelling-up agenda. Families across Wales, Northern Ireland and the north of England will feel more left behind than ever.

"If the government really wants to help ordinary people, then they would be better off investing in what the economy actually needs – better health, education and skills.”

On Friday afternoon responding to Kwarteng's announcements, Liz Truss said the government's "Growth Plan" will get "more jobs, more investment and more opportunities to communities right across the United Kingdom".

Watch: Kwasi Kwarteng axes top income tax rate for highest earners