Particularly controversial was the cut in income tax for the upper class from 45% to 40%, which roiled UK financial markets.
Article written by
Published on 03/10/2022 10:34 AM Updated on 03/10/2022 11:05 AM
Reading time: 1 min
The British government is backing down. Finance Minister Kwasi Kwarteng announced on Monday October 3 that he would reconsider cutting income tax for the wealthiest, a measure announced ten days ago that had roiled financial markets in Britain.
We understand and we have listened. pic.twitter.com/lOfwHTUo76
— Kwasi Kwarteng (@KwasiKwarteng) October 3, 2022
“It is clear that the elimination of the 45% tax rate has overshadowed our mission to address the difficulties in our country. Therefore I announce that we will not pursue them further,” Kwasi Kwarteng tweeted, clarifying that he had “listened” to the critics.
“This will allow us to focus on executing the key elements of our growth plan. Firstly, the energy price cap,” explained the minister. This measure is worth £60 billion (€68 billion) in just six months, while for households it is set to last two years.
British Prime Minister Liz Truss, arriving at Downing Street in early September, and the Justice Secretary announced on September 23 a massive domestic energy supply plan, accompanied by huge tax cuts. Particularly controversial was the reduction in income tax for the upper class, which would have fallen from 45% to 40%. She has been accused of favoring the better off amid a UK cost of living crisis.
While the UK government had announced further tax cuts, the plan had roiled the financial markets. The pound thus fell to its all-time low and UK government lending rates rose to their highest level since the 2009 crisis, threatening the country’s financial stability. The Bank of England needed urgent action last week to stabilize interest rates that were threatening to bankrupt pension funds.