UK Prime Minister Liz Truss dropped a plan to cut taxes for the highest earners just 10 days after announcing it, in a bid to fend off a mounting rebellion from Members of Parliament in her own Conservative Party. Chancellor of the Exchequer Kwasi Kwarteng announced the decision in a tweet early Monday, saying “we get it, and we have listened.” In a statement posted with his tweet, he said the decision to scrap the 45% rate of income tax had become a “distraction.”

The announcement also marked the first major policy U-turn under British Prime Minister Liz Truss, who took office less than one month ago. The announcement also came after former cabinet ministers Grant Shapps and Michael Gove voiced opposition over unfunded tax cuts unveiled by Kwarteng in his controversial mini-budget on September 23.

In making the U-turn, Truss and Kwarteng will be hoping to draw a line under days of market turmoil that followed Kwarteng’s Sept. 23 fiscal package. Even so, it’s a major reversal for a government that’s been in office for just a month, especially after the premier and chancellor had spent days defending the measures. Truss said on Sunday that she was committed to the package of measures.

British Prime Minister Liz Truss said on Monday that the government’s focus was on “building a high growth economy”, after her finance minister reversed plans to cut the highest rate of income tax.

“We get it and we have listened,” Truss said on Twitter, retweeting finance minister Kwasi Kwarteng’s statement on the same.

“Our focus now is on building a high growth economy that funds world-class public services, boosts wages, and creates opportunities across the country.”

Sterling rebounds

The pound erased losses to trade 0.8% higher against the dollar. UK’s tax cut plans unleashed financial chaos last week, which saw sterling hit an all-time low of $1.0327 and sent gilts spiralling, prompting the Bank of England to step in. As recently as Sunday Prime Minister Liz Truss reiterated that the government was sticking with its policies.

Kwarteng had proposed to remove the 45-percent rate applied to Britons earning more than £150,000 ($167,400) per year. The so-called mini budget had sent the pound plunging to a record dollar low and sent bond yields spiking on fears of a borrowing splurge.

Source: Livemint (News Channel)