The UK’s chancellor Kwasi Kwarteng has scrapped the top rate of income tax following criticism from Conservative MPs and turbulence in the financial markets.
“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,” said Kwarteng in a tweet on Monday.
“As a result, I’m announcing we are not proceeding with the abolition of the 45p tax rate. We get it, and we have listened,” he added.
Kwarteng said the move would allow the Conservatives “to focus on delivering the major parts of our growth package”.
Kwarteng, speaking on BBC Breakfast on Monday, said “we felt the [response to the] 45p tax cut rate was drowning out a strong package on intervention on energy and we decided not to proceed with getting rid of” it.
The chancellor’s statement follows criticism from former cabinet ministers Michael Gove and Grant Shapps as well as market turbulence in the aftermath of the government’s “mini” Budget.
Even before this all happened, the pound had actually returned to pre-announcement of the tax-cut levels, bringing a splash of cold water to thousands of hot takes on the British economy. Had the pound priced in a policy reversal, or did the BoE’s emergency intervention reassure it? [But why would the pound rise if the central bank promises to add more liquidity, i.e., more pounds floating around the market]
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