Finance Minister Kwasi Kwarteng confirmed on Monday morning that the government would scrap its plans to cut taxes for the country’s highest earners.
Leon Neal | Getty Images News | Getty Images
British Chancellor of the Exchequer Kwasi Kwarteng said on Monday the government would not be distracted from delivering on its growth plan, shortly after the government dramatically abandoned its intention to cut income tax for the country’s highest earners.
“What a day,” Kwarteng said, addressing attendees at the Conservative Party’s annual autumn conference in the central English city of Birmingham.
related investment news
“It’s been tough. But we have to focus on the job in hand. We have to move forward, no more distractions,” he continued. “We have a plan and we have to go ahead and deliver it. That’s what the public expects from the government.”
Earlier in the day, the British government said turned a plan scrapping the top 45% of income tax paid on earnings above £150,000 ($166,770) a year after a growing public backlash and major market turmoil.
Along with the new prime minister, Liz Truss, Kwarteng had spent the last 10 days defending the policy even as the British pound fell to a historic low, mortgage deals were pulled from the market and British government bonds began selling off at a historic rate.
“I can be honest, I know the plan that was put forward just 10 days ago has caused a bit of turbulence,” Kwarteng said. “I get it. I get it. We listen and have listened – and now I want to focus on delivering the major parts of our growth package.”
The proposed tax cut was widely seen as a politically toxic decision at a time when the country is facing a worsening cost of living crisis.
“We understand and we have been listening,” Kwarteng said in a statement Monday morning.
“It is clear that the abolition of the 45p tax rate has become a distraction from our overriding mission to tackle the challenges facing our country. As a result, I am announcing that we will not proceed with the abolition of The 45p tax rate.” he added.
Speaking to the BBC on Sunday, Truss defended the unfunded measures in the government’s so-called mini-budget, but admitted she could have “done a better job of laying the groundwork” for the announcements.
Economists and analysts were skeptical that the U.K. government’s U-turn on tax cuts for the wealthy would remedy the market’s bias, but notes that it only accounts for a small part of the equation in terms of the broader spending plans.
Sterling traded up 1.1% to $1.1289 in afternoon trade in London.
— CNBC’s Jenni Reid contributed to this report.