Kwasi Kwarteng has abandoned his plan to axe the 45p tax rate for top-earners after a Tory revolt, in a humiliating U-turn at the Conservative conference.
Just 24 hours after Liz Truss insisted the cut – for Britain’s richest people, earning more than £150,000 – would go ahead, the chancellor has backtracked under fierce pressure.
“We get it and we have listened,” Mr Kwarteng said, calling the 45p rate cut “a distraction from our overriding mission to tackle the challenges facing the country”.
The U-turn comes after Conservative big-hitters Michael Gove and Grant Shapps spoke out against handing huge rewards to the rich while benefits are set to be cut in real terms.
There was a growing likelihood that the plan would be defeated in the Commons, as the Tory revolt grew – despite the vote being delayed until as late as next year.
The climbdown will raise fresh questions about Mr Kwarteng’s future, after Ms Truss told the BBC that the 45p rate cut was his idea alone.
The government will also hope to calm the turmoil in the financial markets, although the £2bn cost of removing the 45p rate was only a small part of the huge increase in government borrowing.
The bigger problem from it was political – the criticism of many Tories that it spelt electoral doom for the party and was distracting from the welcome freeze on energy bills.
On Sunday, Mr Gove warned the 45p cut showed “the wrong values”, saying he would not vote for it, while Mr Shapps called it “an unforced error that is harming the government’s economic credibility”.
Mr Kwarteng will also be required to rewrite his conference speech, later on Monday, after the Treasury briefed that he would “stay the course” over his policies.
He still faces further revolts over the looming benefit and spending cuts – to help fund wider tax cuts – and his refusal to reveal the verdict of the Office for Budget Responsibility on his plans.
More to follow
