LONDON (Parliament Politics Magazine) – Following a strong protest from Tory MPs, Chancellor Kwasi Kwarteng has revealed that the government is abandoning plans to grant the wealthiest 1% a tax break.
In a tweet, Mr. Kwarteng said that the policy had turned into a “distraction” from his goal of growing the economy.
“We get it, we have listened”, he said.
In light of the persistent crisis of cost-of-living, the proposal to cut the 45p rate—which is paid by those who make over £150,000 annually—was criticised as unfair.
It was included in the tax-cutting mini-budget that was released last Friday, but it needed to be approved by a vote.
One of the prominent Tories who had criticised the policy publically, former cabinet minister Grant Shapps, told Sky News that it would not have passed parliament.
There is no mathematical reason why MPs would vote in favour of this, he claimed. The policy didn’t make sense and didn’t add up.
It didn’t take much door-knocking to see how unpopular it had become, he added.
A number of proposals, including the tax cut, caused market volatility during the previous week, resulting in historic lows for the pound against the dollar.
Even when the International Monetary Fund was vocally critical of the tax cuts, and an unusual emergency intervention of £65 billion by the Bank of England to restore order, the chancellor and the PM have spent the most of the last ten days doubling down on their plans.
After warning Conservative MPs they would lose the whip (i.e., be suspended from the party) if they voted against it, Ms. Truss was likely to postpone the vote on the 45p rate tax cut to buy herself more time.
However, the uprising swelled overnight as Mr. Shapps joined Michael Gove, another former Cabinet member, in publicly criticising the proposals.
Kwarteng not even thinking about leaving resigning
Hours before he was scheduled to tell the Conservative Party convention in Birmingham that the government “must stay the course,” Mr. Kwarteng changed his mind about the policy.
The chancellor responded to a question about how the U-turn affected his credibility by saying on BBC Breakfast, “We are 100% focused on the growth plan.”
He had been in Parliament for 12 years, and there had been many things that the government had decided to change its view on when it listened to people, he continued.
He claimed he had “not at all” thought of resigning despite the setback to his position of authority.
He also refrained from apologising to the public directly, telling BBC Radio 4’s Today programme instead and said: “There’s humiliation and contrition and I’m happy to own it.”
Ms. Truss tweeted shortly after Mr. Kwarteng announced the U-turn: “We get it and we have listened.
“The abolition of the 45pc rate had become a distraction from our mission to get Britain moving.
“Our focus now is on building a high growth economy that funds world-class public services, boosts wages, and creates opportunities across the country.”
Their economic credibility is ruined
Overnight trade on Monday saw a sharp increase in the pound as news broke that the government would not go through with its plan to eliminate the 45p tax rate.
Ms. Truss and Mr. Kwarteng were under pressure from Labour to abandon the remainder of their tax-cutting mini-budget.
The decision had come too late for the people who would pay higher mortgages and greater prices for years to come, shadow chancellor Rachel Reeves said.
She said “The Tories have destroyed their economic credibility and damaged trust in the British economy,”
Their kamikaze budget needed to be reversed right away.
The leader of the Lib Dems, Sir Ed Davey, reiterated those comments, urging the Tories to call off their party conference and to recall parliament in order to “sort this mess out.”
Every day it became more obvious that the Conservative government had no strategy, no idea, and was totally out of touch, he claimed.
