Finance Minister Kwasi Kwarteng said: “It is clear that the repeal of the 45p tax rate has become a distraction from our vital mission to address the challenges facing our economy. face”.
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LONDON – The UK government on Monday reversed plans to scrap the top income tax rate, following public backlash and massive market turmoil.
The new government has announced a series of tax cuts just weeks after its term, but they are not well received by the financial markets. The adoption of the highest tax rate paid on income above £150,000 ($166,770) from 45% to 40% is seen as particularly politically toxic as Britons face a cost-of-living crisis.
In the days following their announcement, the British pound fell to an all-time lowMortgage transactions were pull from the market and UK government bonds began to sell off at a historic rate, causing the Bank of England Start the temporary purchase program to smooth out volatility.
On Monday, Finance Minister Kwasi Kwarteng confirmed that the government would scrap a plan to cut taxes for the country’s highest earners.
“It is clear that the repeal of the 45p tax rate has become a distraction from our vital mission to address the challenges facing our economy,” Kwarteng said in a statement.
“I am therefore announcing that we will not proceed with the repeal of the 45p tax rate. We understand and we have listened.”
Pound dance in a short time
Pound surged on Monday morning due to reports that the UK government was preparing to announce a rollback. Sterling 0.8% higher than dollar at one stage, but fell to $1.1212 at 7:30 a.m. London time after the news was confirmed.
With the ruling Conservative Party plunge in opinion polls because of the so-called “small budget”, which is also be censured of the International Monetary Fund in a rare move, some of its own politicians voiced opposition to the proposals.
Main rotation
Grant Shapps, the former Transport Secretary, said in an interview with the BBC on Monday morning that the reversal in the top tax rate cuts was a “reasonable response” because the tax cuts are for for “those who need them the least … irritating those who stay in an unsustainable way.”
It represents a major and humiliating turning point for new Chancellor Liz Truss, who insisted on Sunday that she was “fully committed” to the cuts.
She also revealed that the plan was instigated by Kwarteng and had not been announced to her entire cabinet. The Treasury said it would benefit an average of £10,000 annually for the country’s 660,000 highest earners.
Truss said in a tweet on Monday: “The abolition of the 45pc rate has become a distraction from our mission to move Britain forward.”
“Our focus now is on building a high-growth economy, funding world-class public services, raising wages and creating opportunity across the country.”
