Notwithstanding the struggles of Jeremy Hunt’s constituent, £100,000 a year in the UK is, by any possible objective measure, a high income.
The median for working-age households across the country is estimated to be just above £35,000, and anything higher than £81,357 puts you in the top 5%.
Even in the relatively affluent Godalming and Ash constituency Hunt is contesting, where a chat with an unhappy voter prompted him to muse about the challenges of six-figure salaries, estimates by the consultancy Electoral Calculus put the median at little more than half that: £56,606.
The elections expert Prof Paula Surridge, the deputy director of the thinktank UK in a Changing Europe, called Hunt’s decision to double down on his claim on Sunday morning “bizarre”.
“It will really reinforce the idea that the Conservatives are out of touch,” she said, adding that Hunt – whose hold on the newly created constituency looks tight – is presumably “not thinking of what this looks like as a chancellor, he’s thinking as a local MP”.
Moreover, the chancellor’s comments came in a week when shocking data revealed the sharp deterioration in living standards at the other end of the income spectrum.
Official figures showed 300,000 more children were plunged into poverty in 2022-23. Almost 4 million people across the country experienced outright destitution – the inability to afford the basic essentials of life, such as food, clothing and energy.
But even against this grim backdrop, there are two reasons Hunt’s analysis has just a grain of truth – though neither of them are good news for him or his beleaguered party. The first is that the group of people whose living standards have been dented by the current crisis extends beyond the lowest paid, and well into the top half of the earnings distribution.
Analysis by the Resolution Foundation last year suggested that three-quarters of the burden of the forecast rise in mortgage repayments as interest rate rises cascaded through the economy would fall on the top 40% of earners.
The percentage hit has been greater for lower earners; but many of those on six figures are still likely to have had their living standards dented – albeit from a comfortable starting point.
This issue was highlighted by the former Conservative minister George Freeman, who said in January he had resigned his ministerial post – salary £120,000 – in part because he had been hit by a £1,200-a-month increase in mortgage repayments, which he perhaps hoped to tackle by taking on a better-paid second job.
Interest rates look to be on the way down later this year, but remain well above the level at which most expiring fixed rate deals are set – something for which many voters may well blame the Tories, at least in part.
The second grain of truth in Hunt’s remarks relates to the specific quirks of the tax and benefit system for high earners – which his offer of expanded free childcare will amplify.
after newsletter promotion
The marginal tax rate on every extra £1 earned above £100,000 is already 62%, as HMRC gradually withdraws the tax-free personal allowance for these higher earners.
But £100,000 is also the absolute cutoff point for Hunt’s new free taxpayer-funded childcare offer, being phased in over the next 18 months. If either parent earns £100,000 or more, the family will receive no additional help – as is already the case with the government’s tax-free childcare scheme. Below £100,000, they will be entitled to 30 hours a week free, from when their child is nine months old.
The tax campaigner Dan Neidle has pointed out that given this benefit could be worth perhaps £20,000 a year to a two-child family, every extra pound earned between £100,000 and £154,000 will be more than swallowed up by the downside of missing out on the free nursery hours.
“If a political party went into an election promising a tax system with these marginal rates, there would be uproar. But instead, we’ve drifted into this disaster over many years,” he said in a post-budget blogpost.
Given this perverse incentive, some higher-earning parents are likely to decide to cut their working hours – or if they are lucky enough to be able to afford to, increase their pension contributions – to bring their qualifying income down below the magic £100,000.
All this will seem an unimaginable luxury to families struggling to make ends meet on much lower incomes. But it underlines not just the oddity of the way the £100,000 cutoff works, but also the sheer scale of the costs facing many households.
The Organisation for Economic Co-operation and Development (OECD) has put the UK’s childcare costs among the highest in the rich world, relative to average incomes.
Surridge says even those on the soaraway salaries to whom Hunt is hoping to appeal may not feel very grateful for his sympathy. “It just highlights the fact that if people are struggling, they’re struggling because of the actions of the government anyway.”
