UK’s Truss drops plan to axe tax rate for top earners
UK Prime Minister Liz Truss has dropped a controversial plan to abolish the top rate of income tax after the proposal angered backbench MPs and sent the British pound to record lows.
“We get it, and we have listened,” Truss said in a statement posted on Twitter on Monday.
“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.”
Truss’ statement came shortly after Chancellor of the Exchequer Kwasi Kwarteng said the plan to axe the 45 percent tax rate, which applies to earnings of more than 150,000 pounds ($168,000), would not go ahead after becoming a distraction from the government’s “overriding mission to tackle the challenges facing our country”.
The British pound immediately rose on the news, reaching $1.128, its highest level in 10 days.
The decision marks a humbling climbdown for Truss, who has been in the top job for less than a month and on Sunday had insisted her government’s contentious economic plan would go ahead as planned.
Kwarteng’s “mini-budget” sent investors rushing to sell off the pound last week in a massive vote of no-confidence in London’s ability to manage its debts amid sharply rising interest rates.
The plan, which included the biggest tax cuts in 50 years along with a package of subsidies to help households cope with rising energy bills, would have required the government to borrow an extra 72 billion pounds ($77.7bn) during the next six months.