“We got it, we listened,” Kwarteng wrote on Twitter. It is clear that the removal of the maximum rate has become “a distraction from our primary task of meeting the challenges our country faces.” Kwarteng wants to stick to other equally controversial parts of the economic plan – including tax cuts for other income groups despite extremely high inflation.
The objective of the Truss government is to boost economic growth with tax plans. “We are now focused on building a high-growth economy that funds world-class public services, raises wages and creates opportunity across the country,” Truss said Monday.
Long-range consequences
The consequences of the original announcement would have been far-reaching. Because the plans would have to be financed through debt. According to experts, the UK debt mountain would have increased by around £400bn (EUR447bn) over the next five years as a result of tax reform as per previous plans.
APA/AFP/Oli Scarff Finance Minister Kwarteng says goodbye to tax breaks for the richest
There was a threat of rebellion in his own party
The pound course fell accordingly after the original announcement. After the reversal, the pound has now recovered to $1.12, the level it was before the September 23 budget announcements.
Previously, prominent members of the Conservatives, such as former ministers Michael Gove and Grant Shapps, had sharply criticized the tax breaks and the huge national debt and indicated that they intended to vote against them in parliament. The government feared a rebellion within its own party.
Truss defended plans to the end
Truss had defended the measures on Sunday, but admitted that the announcements could have been better crafted. Truss and Kwarteng insisted that their plan would ensure a growing economy and eventually generate more tax revenue that would offset the cost of borrowing to finance current cuts. But they also signaled that public spending must be cut.
On Saturday, Truss acknowledged “short-term disruption” to his political actions in UK markets, but said he would “do things differently”. “This includes difficult decisions and short-term interruptions,” the conservative politician wrote in a guest article in the “Sun.” The British economy has been slowed down by high taxes for a long time.
Increase in manpower
The Truss government is not only under economic pressure, but also politically. According to a YouGov poll, 57% of Brits think budget measures are unfair. Labour, in particular, is currently benefiting from the disappointment, the party is on a rare high in the polls. The Social Democrats outnumbered the Conservatives by more than 17% – numbers like this haven’t been seen since the era of Prime Minister Tony Blair.