The government is ditching much-criticised plans to scrap the 45p top rate of income tax, the chancellor has announced.
In what the BBC described as a “humiliating climbdown”, Kwasi Kwarteng told the broadcaster that the proposal, announced ten days ago in his mini budget, had become “a massive distraction on what was a strong package”.
“We just talked to people, we listened to people, I get it,” he said.
"We have listened" Kwasi Kwarteng has announced a U-turn on the plan to cut the top rate of income tax. In a statement shared on twitter, the Chancellor says the "abolition of the 45p tax rate has become a distraction"#KayBurley: https://t.co/WUnquWvHqf📺Sky 501 and YouTube pic.twitter.com/Oe6kfypcta
— Sky News (@SkyNews) October 3, 2022
At least 14 Tory MPs had come out publicly against the plan, The Times reported yesterday, including former ministers Michael Gove and Grant Shapps.
The latter had predicted this morning that Liz Truss would lose a Commons vote on cutting the top tax rate. “I don’t think the House is in a place where it’s likely to support that,” Shapps told the BBC.
The Sun described the tax U-turn as a “body blow to the new government”. The Financial Times said the “retreat” would “add to Tory concerns” that Kwarteng and Truss have “lost a grip” on the economy.
The pound hit a record low against the dollar after Kwarteng announced the tax cuts, but sterling “edged higher” this morning, rising 0.3% against the dollar to just under $1.12 in trading in Europe, the paper reported.
News of the U-turn came hours before Kwarteng addresses the Conservative conference in Birmingham. Overnight briefings of his speech showed that the chancellor had been planning to hold firm on the 45p tax measure, saying: “We must stay the course. I am confident our plan is the right one.”
But now, Truss’ “first budget is in tatters with its central policy about to be ditched, her first party conference as prime minister is descending into chaos, and her position is considerably weaker”, said Politico’s London Playbook.
