UK Chancellor Kwasi Kwarteng backtracks on 45 percent tax rate cut

LONDON — The British government said “we get it” as it abandoned plans to abolish the top rate of income tax for its highest earners, a key part of its centerpiece economic plans that spooked the markets and saw the British pound slump to an all- time low against the US dollar.

In a major U-turn for the British government, Prime Minister Liz Truss said Monday that the proposed scrapping of the 45 percent rate for those earning more than 150,000 pounds ($168,000) had become a “distraction.”

Kwasi Kwarteng, the new chancellor of the Exchequer, or finance minister, issued a similar statement, saying: “We get it, and we have listened.”

Truss’s government unveiled its hugely controversial economic plan in a “mini-budget” on Sept. 23. It would see the UK borrowing trillions to pay for tax cuts and spending to insulate consumers from soaring energy bills.

The British pound falls to an all-time low against the dollar after taxes slashed

The reaction to the plans was swift. Investors, fearing the moves would worsen inflation, dumped the pound and government bonds. In a highly unusual move, the Bank of England intervened last week to stop a financial market revolt.

The Conservative Party’s popularity has plummeted as well. In one breathtaking survey by YouGov, the Conservatives lagged 33 percentage points behind the opposition Labor Party, a gap not seen since the 1990s.

The U-turn is a huge blow to the authority of Truss, who has been in office for just under a month. As recently as Sunday morning, she said she was committed to the policy and would stick with the tax cuts. Kwarteng had been expected to defend the measures in his address to the Conservative Party’s annual conference later Monday.

But the government faced a growing backlash from within its own ranks, with several Conservative lawmakers coming out publicly to voice their opposition to plans that offered the best paid a tax cut while millions are facing a financial squeeze from the cost-of-living crisis.

The plans still have to be passed by Parliament and some commentators have questioned whether they would have made it through.

“I can’t support the 45p tax removal when nurses are struggling to pay their bills,” tweeted Conservative lawmaker Maria Caulfield, who served as a minister of state for health in the previous government.

Michael Gove, a senior Conservative, said that unfunded tax cuts were “not Conservative.”

Asked by the BBC if he was scrapping the plans because they wouldn’t get support in Parliament, Kwarteng said: “It’s not a question of getting it through, it’s a question of actually getting people behind the measure. It’s not about parliamentary games or votes in the House of Commons.

“It’s about listening to people, listening to constituents, who have expressed very strong views about this, and on balance I thought it was the right thing not to proceed,” he said.

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