London Prime Minister Liz Truss is reversing her plans to abolish the top income tax rate of 45 percent. In doing so, the head of government is reacting to the strong opposition from members of her own conservative party.
Finance Minister Kwasi Kwarteng confirmed the British government’s change of course on Monday morning in Birmingham: the top tax rate for top earners will not be abolished after all. “We understood, we listened,” wrote the conservative politician in a statement published on Twitter.
Previously, prominent members of the Tory party such as ex-ministers Michael Gove and Grant Shapps had sharply criticized the tax breaks and the enormous national debt and indicated that they intended to vote against them in parliament. The government feared a rebellion within its own party.
Just over a week ago, Kwarteng announced the tax cuts, which are primarily intended to benefit the richest in society. The new government of Prime Minister Liz Truss wanted to boost economic growth.
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After the announcement of the debt funded plans the pound rate had plummeted. The British central bank felt compelled to step in and purchase government bonds with long maturities – without a ceiling.
Kwarteng wants to stick to other, equally controversial parts of the economic plan – including tax cuts for other income groups despite enormously high inflation.
>> Read our global risk analysis here: “Biggest source of instability for global financial markets” – Britain on the sidelines
At the start of the Conservative Party conference, Prime Minister Truss also received a bad report from the population. In a recent survey conducted by the opinion research institute Opinium for the “Observer”, the approval ratings for Truss among Britons fell from -9 to a value of -37 within a week – according to the institute, lower than the value of Ex- Prime Minister Boris Johnson shortly before his forced resignation (-28).
Opinium expert James Crouch called the opinion poll “the worst poll result for a Conservative Prime Minister since 2010”.