Listen to the audio version of the article
Britain’s Prime Minister Liz Truss has abandoned her plan to cut taxes on the highest earners just 10 days after her announcement to stave off a growing rebellion by MPs from her own Conservative party.
Chancellor of the Exchequer Kwasi Kwarteng announced the decision in a tweet, saying, “We understood and we listened.” overarching mission to address the challenges facing our country.”
Truss: The goal is to build a high-growth economy
Prime Minister Truss retweeted Finance Minister Kwasi Kwarteng’s statement, adding: “Our goal now is to build a high-growth economy that funds world-class public services, raises wages and creates opportunities across the country.”
Retreat after market reactions
Kwarteng gave an interview to the BBC following the announcement, dismissing the possibility of stepping down. Liz Truss and her Chancellor of the Exchequer announced a massive family energy support package on September 23, accompanied by massive tax cuts. The top income tax cut, which would have been cut from 45% to 40%, has been the subject of bitter controversy as it is accused of favoring the wealthiest amid the kingdom’s cost-of-living crisis.
Further tax cuts were also announced, including the elimination of corporate tax and social security increases and the suspension of environmental taxes. The entire plan, which economists estimate at between £100 billion and £200 billion, but whose funding and economic impact have not been fully quantified, has sent financial markets into turmoil. The pound has fallen to historic lows and UK government debt rates have risen to their highest levels since the 2009 crisis, threatening the country’s financial stability. The Bank of England intervened last week to stabilize interest rates, threatening to bog down pension funds and also posing serious problems for those who have or are planning to take out a home loan.
Following the announcement, the pound repurchased 0.8% higher against the dollar while 10-year and 30-year UK government bond rates fell: the 10-year yield fell 8 points to 3.99% and above 30 years ago, it fell more than 4 points to 3.76 percent.
Labor opposition: ‘All credibility lost’
“The Conservative government has lost all credibility and damaged confidence in the UK economy.” This was stated by Rachel Reeves, Chancellor of the Labor team’s Shadow Exchequer, following the executive’s sudden withdrawal. “But it’s too late for families, who will be paying higher mortgages and higher prices for years to come,” Reeves added, referring to the economic instability caused by the maneuver. For Reeves, it was a “kamikaze maneuver” that needs a complete overhaul.