Finance Minister Kwasi Kwarteng confirmed on Monday morning that the government would abandon plans to cut taxes for the country’s top earners.
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UK Finance Minister Kwasi Kwarteng said on Monday the government would not allow itself to be sidetracked from implementing its growth plan, shortly after the government dramatically abandoned its intention to cut income taxes on the country’s highest earners.
“What a day,” said Kwarteng, addressing attendees at the Conservative Party’s annual Autumn Conference in the central English city of Birmingham.
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“It was hard. But we have to focus on the task at hand. We need to move forward, no more distractions,” he continued. “We have a plan and we have to move forward and implement it. This is what the public expects from the government.”
Earlier in the day, the UK government reversed a plan to scrap the top 45% rate of income tax paid on earnings over £150,000 ($166,770) a year after growing public backlash and major market turmoil.
Alongside new Prime Minister Liz Truss, Kwarteng had spent the last 10 days defending policy even as the British pound fell to an all-time low, mortgage deals were pulled from the market and UK government bonds sold off at an historic rate.
“I can be honest, I know that the plan, which was presented just ten days ago, caused a bit of turbulence,” said Kwarteng. “I understand. I understand. We are listening and have been listening – and now I want to focus on delivering the key pieces of our growth package.”
The proposed tax cut was widely viewed as a politically toxic decision at a time when the country is facing a deepening cost-of-living crisis.
“We understood and we listened,” Kwarteng said in a statement Monday morning.
“It is clear that the removal of the 45p tax rate has become a distraction from our overarching mission of addressing the challenges facing our country. Therefore, I am announcing that we are not proceeding with the elimination 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 conceded she “could have done a better job laying the groundwork for the announcements”.
Economists and analysts were skeptical that the UK government’s U-turn on tax cuts for the wealthy would ease markets’ jitters, but noted that it only fills a small part of the equation in terms of broader spending plans.
Sterling was traded up over 1.1% to $1.1289 during afternoon trade in London.
— CNBC’s Jenni Reid contributed to this report.