UK govt makes U-turn on tax cut for the rich, but vows to go ahead with reform

Published October 4, 2022
Britain's Chancellor of the Exchequer Kwasi Kwarteng delivers his keynote address on the second day of the annual Conservative Party Conference in Birmingham on October 3. — AFP
Britain's Chancellor of the Exchequer Kwasi Kwarteng delivers his keynote address on the second day of the annual Conservative Party Conference in Birmingham on October 3. — AFP

BIRMINGHAM: Britain’s under-fire finance minister Kwasi Kwarteng on Monday vowed to press on with his controversial economic reform plans, despite announcing a dramatic U-turn on a controversial tax cut for high earners.

The proposed cut was part of a debt-driven economic package that has bombed with the markets, the electorate and much of the ruling Conservative party.

The abrupt reversal raised questions about his and Prime Minister Liz Truss’s right-wing policy agenda, less than a month after taking power and a day after both vowed to stay the course.

“What a day. It has been tough,” Kwarteng said in a speech to the Tories’ annual conference in Birmingham, central England.

But he told delegates that “we need to focus on the task in hand”, implicitly criticising his Tory predecessors by saying there was a need to boost the economy out of its “slow, managed decline”. “To grow the economy we really do need to do things differently,” he said.

Kwarteng pointedly avoided any specific mention of his about-face on the proposed scrapping of the 45 percent top rate of income tax.

But he insisted his and Truss’s contentious plans, which include axing a cap on bankers’ bonuses and reversing a planned rise in corporation tax, as well as a recent hike in national insurance contributions, were “sound” and “credible”.

“It will increase growth,” he added in the speech, which was delayed by an unspecified security alert at the venue. Police lifted the alert about an hour later.

Earlier, Kwarteng said he had never considered resigning over the furore caused by the proposals, saying only that the decision to drop the tax cut was because it had become a “distraction”.

On the markets, the intention to pay for the cuts with billions more in extra borrowing had sent the pound tumbling to a record low against the dollar and UK government bond yields soaring. The pound rebounded Monday as the government partially reversed course.

Nevertheless, Kwarteng and Truss remain in the eye of a political storm, given the perceived unfairness of the package, which could yet see cuts to spending and benefits amid Britain’s worst cost-of-living crisis in generations.

As late as Sunday, the finance chief had been due to tell the conference that “we must stay the course”, according to a preview of his speech released by the Conservatives.

Truss on Sunday admitted communication errors in how the September 23 economic package had been presented, but agreed she was “absolutely committed” to abolishing the top tax rate.

Within 24 hours, though, the 47-year-old prime minister — only in the role since September 6 — had performed one of most striking government U-turns in recent memory.

Truss told the BBC she had not discussed axing the high-earners’ tax band with her cabinet, who only seemed to learn of the reversal along with the public on Monday.

Published in Dawn, October 4th, 2022

Opinion

Editorial

A call for bloodshed
30 Nov, 2022

A call for bloodshed

The state has wasted precious time by not consolidating its success in pushing TTP out of its strongholds in the north.
Missing childhoods
30 Nov, 2022

Missing childhoods

THE fact is that despite some legal efforts to end the curse of child marriage taking place in Pakistan under the...
Unemployment concerns
30 Nov, 2022

Unemployment concerns

THE ILO finding that labour market recovery from the impact of the Covid-19 pandemic in Pakistan, as in many other...
Back to politics
Updated 29 Nov, 2022

Back to politics

PDM and PTI must realise that neither will get what they want if they keep fighting bitterly at every turn.
Election delay
29 Nov, 2022

Election delay

OF recent, leaders from the ruling PML-N have been dropping hints about a possible delay in general elections after...
Sugar woes
29 Nov, 2022

Sugar woes

IT’S that time of year again when cane growers get anxious over the delay in the commencement of the new sugar...