UK Prime Minister Liz Truss reverses her position on 45% tax cut for wealthiest to prevent rebellion

Liz Truss
Liz Truss

It came after days of instability in the world’s financial markets, which were brought on by high government borrowing costs and a sharp decline in the value of the pound versus the dollar as the Bank of England intervened to support the nation’s pension funds.

Following market instability and to head off an anticipated uprising within the ruling Conservative Party, the newly elected Liz Truss-led UK government on Monday made its first dramatic U-turn on its central pillar of tax cuts by scrapping a proposal to remove the top rate for the wealthy.

The announcement in his mini-budget last month of a potential repeal of the 45 penny tax rate, which will apply to the highest tier of income taxpayers starting in April, became a significant diversion from an otherwise reasonable strategy for economic growth, according to Chancellor Kwasi Kwarteng.

It came after days of volatility in the world’s financial markets, which were scared by high borrowing costs for the government and the pound’s sharp decline against the dollar as the Bank of England was compelled to step in to support the nation’s pension funds.

Liz Truss
Liz Truss

Kwarteng sent out a tweet saying, “We understand, and we have listened,” before going on the radio to defend the newly elected government’s “screeching U-turn.”

Immediately referencing her former Chancellor’s statement, Truss—who succeeded Boris Johnson as Prime Minister last month after a tense leadership contest with British Indian Rishi Sunak—added, “The repeal of the 45pc tax has become a significant distraction from our aim to get Britain moving.”

Our greatest aim right now is to create a quickly expanding economy that will finance first-rate public services, raise salaries, and expand opportunities across the country.

It happened the day after she insisted in a BBC interview on Sunday that her government was still committed to abolishing the top rate of tax for the highest earners, despite criticism from within her own party that she was sending the wrong message at a time when the majority of the country was struggling with rising living costs and household expenses.

Liz Truss
Liz Truss

“It had grown to be a significant distraction from the overall great package. I understand that we simply spoke with and listened to people “Under a barrage of questions on Monday morning, Kwarteng revealed to the BBC.

“Our commitment to the growth strategy is unwavering. Since I’ve been in office, numerous policies have changed as a result of the government’s decision to pay attention to the public “He was adamant.

The Chancellor asserted that the government was still focused on his “radical growth strategy underpinned by reduced taxes to put more money in people’s wallets” and that he did not view the policy change as severe enough to question his own position in the Cabinet.

The key thing is that we’ve taken the decision, and we can now move on with the growth plan, he added. “We can always fight about when we could’ve made the decision,” he said.

Liz Truss
Liz Truss

It is considered to be a significant setback for Truss, who has positioned herself in line with former Conservative Prime Minister Margaret Thatcher, who famously said at a Conservative Party conference 42 years ago that the lady is not for turning when it comes to sticking to unpopular policy decisions.

As the Conservatives conduct their annual party conference in Birmingham, where the new Prime Minister will give her maiden address to the membership, the Truss-led government also reverses course at this time.

Backbench MPs from her own party were increasingly likely to support the programme in Parliament, and the opposition Labour Party was pulling away from the Conservatives in polls with a historically large lead when she decided to reverse course on a crucial element of her tax-cutting agenda.