The British government has abandoned plans to cut income tax for the highest-paid taxpayers as part of a package of tax cuts that caused turmoil in financial markets last week.
Finance Minister Kwasi Kwarteng announced this morning that he will not remove the top bracket of 45% income tax that is paid on income above 150,000 pounds (171,000 euros at current exchange rates) a year.
These taxpayers would go to the 40% bracket.
“We feel and we hear,” said Kwarteng, who acknowledged that the abolition of the upper echelon “has become a distraction from the main mission of addressing the challenges that affect the country.”
The withdrawal comes before a growing number of Conservative MPs who oppose the move announced just 10 days ago, in a “mini-budget” on September 23, which threatened a lead in parliament.
Just hours earlier, the Conservatives had published excerpts from a speech Kwarteng was due to deliver this afternoon at the party’s annual conference, saying: “We have to stay the course. I am confident that our plan is the right plan.”
Prime Minister Liz Truss also defended the measures on Sunday, although she acknowledged she could have “done a better job of preparing” for the announcements.
Truss took office less than a month ago and has promised to radically reshape the British economy to end years of sluggish growth.
However, the plan presented on September 23 by the Executive for a stimulus package that includes 45,000 million pounds (51,000 million euros) in tax cuts, paid for with public debt, has plunged the pound to record lows against the dollar and raised interest rates on sovereign debt.
The Bank of England was forced to intervene in the bond market and fears of a sharp rise in interest rates caused banks to suspend the sale of cheaper mortgage products, causing uncertainty in the real estate sector.
Source: TSF
