UK flips over tax cut for rich that sparked market turmoil

The UK government has dropped plans to cut income taxes on top earners as part of a package of unfunded austerity measures that have fueled financial market turmoil and sent the pound to record lows.

In a dramatic turnaround, Chancellor Kwasi Kwarteng has said he will not scrap the top 45 percent income tax rate paid on income over £150,000 ($261,000) a year.

“We get it and we have listened,” he said in a statement.

Mr Kwarteng said it was clear that the abolition of the 45 percent tax rate has become a distraction from their overriding mission to tackle the challenges facing the country.

The backflip came after a growing number of ruling Conservative Party politicians turned against the government’s tax plans announced 10 days ago.

It also came just hours after the Conservatives released extracts from a speech Mr Kwarteng was due to deliver at the party’s annual conference in the city of Birmingham later on Monday, local time.

He should have said, ‘We have to stay on track. I am convinced that our plan is the right one.’

Prime Minister Liz Truss defended the measures on Sunday, but said she could have made the announcements better.

Liz Truss, with blond hair and gold earrings, grins as she looks into the distance.
Ms Truss took office less than a month ago and pledged to radically reform the UK economy to end years of sluggish growth.(Reuters: Jacob King/ File)

The government’s announcement on Sept. 23 of a stimulus package that includes £45 billion ($78 billion) in tax cuts to be paid through government loans sent the pound plummeting against the dollar.

The Bank of England was forced to step in to support the bond market, and fears that the bank will soon raise interest rates caused mortgage lenders to withdraw their cheapest deals, sparking unrest for home buyers.

The cuts were not popular, even among conservatives.

Cutting taxes on top earners and removing a cap on bankers’ bonuses, while millions face a cost of living crisis caused by rising utility bills, has been widely seen as politically toxic.

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