Just 10 days after a debt-driven budget caused market turbulence and drew harsh condemnation during a cost-of-living crisis, Britain on Monday abandoned plans to lower its top income tax rate.
Finance Minister Kwasi Kwarteng tweeted on the second day of the annual conference of the ruling Conservative Party that he was “not advancing” with the elimination of the highest 45 percent income tax rate because it had turned into a “distraction.”
The statement also represented British Prime Minister Liz Truss’s first significant policy reversal since she assumed office less than a month ago.
“It is clear that the abolition of the 45p tax rate has become a distraction from our overriding mission to tackle the challenges facing our country. As a result, I’m announcing we are not proceeding with the abolition of the … rate.
“We get it, and we have listened.”
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The announcement also came after Grant Shapps and Michael Gove, two former cabinet ministers, expressed their disapproval of the unfunded tax cuts that Kwarteng presented in his contentious mini-budget on September 23.
The removal of the 45 percent tax for Britons making more above $167,400 annually was Kwarteng’s proposal.
The so-called mini budget had caused bond yields to spike on worries about a borrowing binge and sent the pound falling to a record low against the dollar.
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In an effort to mitigate the effects of Russia’s invasion of Ukraine, a major producer of gas, the budget included a pricey freeze on energy costs for households and companies.
(With inputs from agencies)
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