LONDON — British Prime Minister Liz Truss on Monday scrapped her signature plan to cut taxes on the country’s top earners after it sparked market turmoil and huge domestic outcry.
Truss, who has been out of work for less than a month, proposed scrapping the top income tax — saving those earning more than £150,000 ($168,000) a year — as part of a series of unfunded economic reforms that the pound fell to historic lows and damaged Britain’s economic position worldwide.
The pound rose to about $1.12 after the announcement – roughly the value it had before the Sept. 23 budget announcement.
The dramatic turnaround comes just hours after Truss defiantly defended the tax cut and her broader radical economic agenda, saying it was necessary to solve the country’s long-term economic problems. Facing a growing political uprising after days of economic chaos, the government said Monday it was abandoning the plan.
The controversial finance minister Kwasi Kwarteng would defend the plan in a speech to the annual conference of the ruling Conservative Party. “We have to stay focused. I am confident that our plan is the right one,” he would say, according to released preliminary excerpts of the speech.
Instead, he announced the plan was being scrapped in an early morning tweet. “We get it and we’ve listened,” he said, followed by a similar message from Truss.
The abrupt turnaround comes when the Conservatives gather in the central English city of Birmingham for an annual conference, normally a morale-boosting event for activists to hear about the party’s priorities for the coming year.
Instead, the party finds itself in an embarrassing retreat with a resurgent centre-left opposition Labor party, ahead about 20% in opinion polls. With the country already experiencing a grim winter of rising energy bills and food prices, critics accused Truss of having misplaced priorities and intensifying the pain for many.
Labor’s financial spokesman Rachel Reeves said“The Tories have destroyed their economic credibility and damaged confidence in the British economy.”
For some political commentators, the turnaround is too little, too late.
“The damage has been done,” said Simon Usherwood, a professor of politics at the Open University. “It still created an image of a government that thought this was a good idea.”
Truss has long tried to emulate divisive former British leader Margaret Thatcher, who famously said “the lady is not for the run” in 1980 in response to opposition to her own economic liberalization plans. Now, as many critics eagerly pointed out, Truss has changed.
“This just goes to show that it’s a government that can be influenced,” Usherwood said. “She fully supported this plan in interviews on Sunday and is now going back to it. The question is whether she can do anything to breathe new life into her project and her brand.”
Even as Truss defended the policy this weekend, a growing number of senior lawmakers in her party indicated they would vote against in the House of Commons.
The plan to cut taxes on the rich was part of a broader “mini-budget” announced shortly after the new government took office. Aimed at boosting economic growth, it proposed broader tax and regulatory cuts in a £45bn ($50bn) package that had gone unfunded, leaving Britons to wonder what already pressured public services could be cut back to to save money.