Liz Truss Stands by Chancellor Kwasi Kwarteng Amid Tax U-Turn

Strategic Insights -

Following a growing rebellion and widespread criticism, Chancellor Kwasi Kwarteng has reversed his plan to abolish the 45% tax rate on earnings over £150,000, a move seen as a potential blow to the authority of Prime Minister Liz Truss. The decision was announced just hours before Kwarteng was due to address the Conservative Party conference, where he had planned to tell party members they must "stay the course" on the plans. Kwarteng acknowledged that the plan had become a "terrible distraction" and admitted that the government had "listened" to criticism.

Key Takeaways:

  • The reversal of the policy to abolish the 45% tax rate will cost the government approximately £2 billion annually.
  • The Chancellor, Kwasi Kwarteng, has stated that the decision was not a result of a change in government policy, but rather a "terrible distraction" that was hindering their economic plans.
  • The government had planned to borrow billions to axe the 45% rate on earnings over £150,000, but has now abandoned this plan.
  • The Prime Minister, Liz Truss, continues to have confidence in her Chancellor, despite the U-turn.
  • The decision may be seen as a blow to the authority of Prime Minister Liz Truss and Chancellor Kwasi Kwarteng.
  • Former Cabinet minister Michael Gove has suggested that he may now support the package, and fellow potential rebel Grant Shapps has welcomed the U-turn.
  • The Chancellor, Kwasi Kwarteng, has declined to directly apologize to the nation for the financial turmoil and rising mortgage rates caused by the policy.
  • The decision may be a sign of a shift in government policy, with the Chancellor suggesting that they may adopt a new era of austerity to pay for the surviving £43 billion of tax cuts.

Statistics:

  • The government's tax plans would have cost approximately £2 billion annually in revenue.
  • The Chancellor's mini-budget included £43 billion of unfunded tax cuts.
  • The pound surged higher in overnight trading on Monday, reaching 1.125 US dollars before paring back some of the gains in early morning trading.
  • The Chancellor has stated that the government is committed to displaying a credible commitment to fiscal sustainability.

Sources:

  • Times Radio
  • BBC Breakfast
  • BBC Radio 4's Today programme
  • PA Graphics
  • PA
  • Tweet by Nadine Dorries