Britain’s beleaguered finance minister on Monday announced a dramatic U-turn on a tax cut announced as part of an economic package that has bombed with the markets, electorate and his party.
The change of course by Chancellor of the Exchequer Kwasi Kwarteng, and by Prime Minister Liz Truss, raised questions about their right-wing project less than a month after she succeeded Boris Johnson.
“We get it, and we have listened,” Kwarteng said on Twitter, announcing that he would no longer be scrapping the 45 percent top rate of income tax levied on the highest earners.
Their plan also comprises lifting a cap on bankers’ bonuses and reversing a planned rise in corporation tax as well as a recent hike in national insurance contributions.
At the same time, they are refusing to rule out cuts to spending and benefits in the middle of Britain’s worst cost-of-living crisis in generations.
The perceived unfairness of the package had ignited a political storm, with senior Tory MPs refusing to confirm they would support it in parliament, as well as tanking with voters in opinion polls.
On the markets, Truss and Kwarteng’s intention to pay for the tax cuts with billions more in extra borrowing had sent the pound tumbling and UK government bond yields soaring.
Kwarteng told BBC television that the focus on the top rate of tax had become a “massive distraction”. But asked if he had considered resigning, he said: “Not at all.”
“I’m very pleased that we’ve decided not to proceed with that because it was drowning out the elements of an excellent plan,” he insisted.
Later Monday at the Tory conference in Birmingham, Kwarteng had been due to say: “We must stay the course. I am confident our plan is the right one.”
– ‘Profoundly’ worried –
On Sunday, Truss admitted communication errors in how the plan had been presented on September 23, without conceding the need for any changes.
In a tweet early Monday, she echoed her finance minister’s message that axing the high-earners’ 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,” she added.
As the Tories began gathering for their four-day gathering in Birmingham, senior party figures were nervous.
Raising borrowing to pay for the £45 billion ($50 billion) in tax cuts was “not Conservative”, former minister Michael Gove told the BBC Sunday, just as Truss left the studio after her own interview.
Gove, ex-prime minister Boris Johnson’s right-hand man in the 2016 Brexit campaign, said he was “profoundly” worried.
Others who, like Gove, backed Rishi Sunak — Truss’s rival in the recent Tory leadership race — had also threatened to vote it down, raising the prospect of a major battle in the House of Commons.
Truss told the BBC she had not discussed axing the high-earners’ tax band with her cabinet, and appeared to distance herself from the move by claiming “it was a decision that the chancellor made”.
That prompted an immediate rebuke from Johnson loyalist Nadine Dorries, who accused the new prime minister of “throwing (Kwarteng) under a bus on the first day of conference” on Sunday.
With the U-turn, the stakes have soared for Truss as she prepares to close the party conference with a keynote speech on Wednesday.
One YouGov survey Friday found 51 percent of Britons think she should resign — and 54 percent want Kwarteng to go.
Several other polls in recent days showed a Labour lead of up to 33 points over the Tories — its biggest since the heyday of former Labour prime minister Tony Blair in the late 1990s.