HomePoliticsUK's Kwarteng scraps tax cut after market crash

UK’s Kwarteng scraps tax cut after market crash

Press play to listen to this article

UK Chancellor Kwasi Kwarteng scrapped his plan to cut taxes for high earners after a backlash from financial markets and Conservative Party colleagues plunged his country into economic crisis.

“We understand it and we have heard it,” Kwarteng said as he announced the dramatic change of direction on Twitter on Monday.

A cut in the top tax rate from 45 pence to 40 pence a pound was the big surprise in his and Prime Minister Liz Truss’s mini-budget announcement last month, which went dramatically wrong.

The aid for people earning more than £150,000 a year had been widely criticized as unfair and deaf at a time of rising cost of living.

The move became “a distraction from our primary mission of addressing the challenges facing our country,” Kwarteng admitted in his statement Monday morning.

Kwarteng told BBC Breakfast the 45p move was “choking a hefty package” that also included support for energy bills and a host of other tax cuts.

When asked if he had considered quitting, he said: “Not at all.”

The scale of opposition from Kwarteng’s Conservative colleagues had threatened his ability to implement the policy when the pound collapsed and government borrowing costs soared, forcing the Bank of England to intervene to prevent the funds from collapsing. UK pension. A rebellion was brewing among Conservative MPs, with even senior figures such as former cabinet minister Michael Gove denouncing the move.

By Sunday night, more than a dozen Conservative rebels had made their concerns public, raising questions about whether the government could pass the tax cut into law.

writing for the timesformer Transport Secretary Grant Shapps called it a “politically silly cut, not even a big revenue raiser and hardly a priority on the prime minister’s to-do list” that “has managed to alienate almost everyone”.

Truss herself had stuck to the plans in a Sunday morning interview with the BBC, while party bosses made a point of talking tough throughout the day. Conservative President Jake Berry suggested the mini-budget would be treated as a vote of confidence in Parliament, meaning MPs who don’t back it could lose the whip and thus potentially their jobs in the next election.

This sparked defiance in some quarters, with junior MP Maria Caulfield tweeting that if “they don’t want this working-class parliamentarian, that’s fair”.

Rushed crisis talks with angry rebels followed, and the turn face it was agreed so late on Sunday night that many MPs only found out about it by reading press reports on Monday morning, in many cases having spent the previous week trying to defend the policy to others.

The move comes on the second day of the Conservative conference in Birmingham, traditionally a time for the party to come together in a show of unity. Kwarteng will address party activists on Monday afternoon and Truss will give her keynote address on Wednesday.

The pound jumped on news of the U-turn, rising more than a penny against the dollar to $1.1263, before pulling back. Traders began to downgrade the chances of hitting 6 percent interest rates next year.

However, it remains unclear whether Kwarteng’s withdrawal will save his own career or the credibility of his boss, Truss, who is facing disastrous poll numbers after being prime minister for just a month.

A Conservative minister highlighted the danger Truss is in ahead of her demotion, saying backing down could make her “look weak, in office but not in power”.

Labor Party Shadow Chancellor Rachel Reeves said the Conservatives had already “destroyed” her economic credibility and warned that the change of course “comes too late for families who will pay higher mortgages and higher prices in the coming years.” to come.”

Source link

- Advertisment -

Most Popular