Britain’s beleaguered finance minister on Monday announced a dramatic U-turn on a tax cut unveiled as part of an economic package that has bombed with the markets, electorate and his party. The abrupt change of course by Chancellor of the Exchequer Kwasi Kwarteng, and Prime Minister Liz Truss, raised questions about their right-wing project less than a month after she succeeded Boris Johnson.
“We get it, and we have listened,” Kwarteng said on Twitter, announcing that he would no longer be scrapping the 45 percent top rate of income tax levied on the highest earners. Their plan also comprises axing a cap on bankers’ bonuses and reversing a planned rise in corporation tax, as well as a recent hike in national insurance contributions.
At the same time, they have refused to rule out cuts to spending and benefits in the middle of Britain’s worst cost-of-living crisis in generations. The perceived unfairness of the package has ignited a political storm as Truss’s Conservatives gather for their annual conference in Birmingham.
On the markets, the intention to pay for the tax cuts with billions more in extra borrowing had sent the pound tumbling and UK government bond yields soaring. The pound rebounded Monday as Kwarteng reversed course, telling BBC television from Birmingham that the focus on the top rate of tax had become a “massive distraction”.
But asked if he had considered resigning, he said: “Not at all.” “I’m very pleased that we’ve decided not to proceed with that because it was drowning out the elements of an excellent plan,” he insisted, pointing to a popular if costly scheme to cap energy bills. Later Monday at the Tory conference, Kwarteng had been due to say: “We must stay the course. I am confident our plan is the right one.”—AFP