Britain’s ailing finance secretary on Monday announced a dramatic U-turn on a tax cut announced as part of an economic package that has bombarded markets, voters and his party.
The change of course by Chancellor of the Exchequer Kwasi Kwarteng and Prime Minister Liz Truss raised questions about their right-wing project less than a month after they succeeded Boris Johnson.
“We got it and we listened,” Kwarteng said on Twitter, announcing that he would no longer remove the top tax rate of 45 percent, which is levied on the highest earners.
Her plan also includes removing the cap on banker bonuses and reversing a planned corporate tax hike and a recent increase in Social Security contributions.
At the same time, they refuse to rule out spending and welfare cuts amid Britain’s worst cost-of-living crisis in generations.
The perceived injustice of the package had sparked a political storm, with senior Tory MPs refusing to confirm they would support it in Parliament and clashing with voters in opinion polls.
In markets, Truss and Kwarteng’s intention to pay for the tax cuts with billions in additional borrowing had sent the pound plummeting and UK government bond yields higher.
Kwarteng told BBC television that the focus on the top tax rate had become a “massive distraction”. However, when asked if he had considered retiring, he said: “Not at all.”
“I’m very glad we decided not to proceed with this because it drowns out the elements of an excellent plan,” he said.
Later on Monday at the Tory conference in Birmingham, Kwarteng should have said: “We have to stay the course. I am confident that our plan is the right one.”
– ‘deeply’ concerned –
On Sunday, Truss admitted to miscommunication when presenting the plan on September 23, without acknowledging the need for changes.
In a tweet early Monday, she reiterated her finance secretary’s message that removing the tax rate for high earners “has 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, increases wages and creates opportunities across the country,” she added.
As the Tories began to gather for their four-day meeting in Birmingham, senior party officials were nervous.
Borrowing to pay for the £45 billion ($50 billion) tax cuts is “not conservative,” former minister Michael Gove told the BBC on Sunday as Truss left the studio following her own interview.
Gove, ex-Prime Minister Boris Johnson’s right-hand man in the 2016 Brexit campaign, said he was “deeply” concerned.
Others, like Gove, had backed Rishi Sunak – Truss’s rival in the recent Tory leadership race – had also threatened to reject him, raising the prospect of a big fight in the Commons.
Truss told the BBC she had not spoken to her cabinet about scrapping the tax band for high earners and appeared to distance herself from the move, claiming “it was a decision by the Chancellor”.
This 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 the conference” on Sunday.
With the about-face, the stakes have risen for Truss as she prepares to end the convention with a keynote speech on Wednesday.
A YouGov poll on Friday found that 51 per cent of Brits think she should step down – and 54 per cent want Kwarteng to leave.
Several other polls in recent days have shown Labor’s lead over the Tories by as much as 33 points – the widest since former Labor Prime Minister Tony Blair’s heyday in the late 1990s.