BIRMINGHAM: British Prime Minister Liz Truss was forced on Monday into a humiliating U-turn after less than a month in power, reversing a cut to the highest rate of income tax that helped spark turmoil in financial markets and a rebellion in her party. Finance minister Kwasi Kwarteng said the decision to scrap the top rate tax cut had been taken with “some humility and contrition.”
Truss and Kwarteng announced a new “growth plan” on Sept. 23 that would cut taxes and regulation, funded by vast government borrowing, to snap the economy out of years of stagnant growth. But the plan triggered a crisis of investor confidence in the government, hammering the value of the pound and government bond prices and jolting global markets to such an extent that the Bank of England had to intervene with a 65 billion pound ($73 billion) programme to shore up markets. With the government’s credibility damaged, lawmakers in the governing Conservative Party said the reversal was inevitable. “So now it’s ‘survive a day at a time’,” one party insider said, declining to be named. While the removal of the top rate of tax only made up around 2 billion out of the 45 billion pounds of unfunded tax cuts, it was the most divisive element of a package that drew the wrath of markets by failing to set out how it would be paid for. Less than a day after Truss went on BBC television to defend the policy, Kwarteng released a statement saying he now accepted it had become a distraction from wider efforts to grow the economy and help households through a difficult winter. –Agencies
