Kwasi Kwarteng U-turns on Planned Tax Cuts

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Image Source: Daily News Era

The UK government scrapped the proposed tax cuts, which included the proposed 45p income tax rate for those with higher incomes.

The measures, which had only been proposed ten days prior, had been “a significant distraction on what was a great package,” according to Chancellor Kwasi Kwarteng, who spoke with the BBC.

After receiving criticism for the suggestion from a number of Tory MPs, Prime Minister Liz Truss has made an embarrassing about-face.

Ms. Truss had stated on Sunday that she was loyal to the policy.

It was stated that the 45p rate—paid by everyone making over £150,000 a year—would be scrapped as part of a package of tax cuts.

Mr. Kwarteng claimed on BBC Breakfast that the proposal was “drowning out a powerful package” that contained tax breaks for corporations and individuals as well as assistance with energy prices.

When asked if he owed anyone an apology, he answered: “The opinions of the public have been taken into account. And that does truly show humility and repentance. It makes me happy to have it.”

“The humility to say hey, we got it wrong, and we are not going to proceed with the rate’s abolition,” he concluded, “is a quality I possess.”

He said that the prime minister made the decision not to remove the tariff.

He said, “Not at all,” when asked if he was considering leaving.

In Mr. Kwarteng, the Prime Minister still has faith, according to Downing Street.

According to Ms. Truss in a BBC interview on Sunday, the choice to decrease the top income tax rate was “made by the chancellor.”

She did, however, add that she was totally committed to it as part of a goal to “simplify” the tax code and promote economic growth.

Mr. Kwarteng said there wouldn’t be any tax cuts before the next Budget in the spring when questioned if his earlier claim that there was “more to come” about tax cuts still stood.

The chancellor stated that more information would be offered in the government’s budget plan on November 23 in response to the question of whether his economic ambitions would lead to decreases in spending on public services.

However, he did claim that the government was following its 2021 Comprehensive Spending Review, which prohibits any increase in spending that is proportionate to inflation.

MPs’ initial reaction to the proposed tax cuts

In addition to the 45p tax rate, the administration had come under fire from the independent spending watchdog Office for Budget Responsibility for failing to provide an economic forecast.

Mr. Kwarteng claimed that there wasn’t enough time to get an accurate forecast and that he had wanted to act at “rapid speed.”

The Labour Party’s opposition urged the administration to “reverse their entire economic, disastrous trickle-down approach.”

According to shadow chancellor Rachel Reeves, the U-turn is “too late for the households that will face higher mortgages and higher bills for years to come.”

Lib Dem leader Sir Ed Davey called for the chancellor’s resignation, who argued that the mini-budget as a whole needed to be revised and that the chancellor no longer had “any credibility.” SNP leader Nicola Sturgeon said that the government had shown “utter ineptitude.”

Read Also: IMF criticizes UK government tax plans

Markets, rival parties, and an increasing number of Tory MPs all opposed plans to eliminate the highest rate of taxation.

The Conservative Party’s Jake Berry had warned Conservative MPs who disagreed with the prime minister’s tax reform measures that they risked losing their party’s whip and being kicked out of the parliamentary party.

However, it became increasingly apparent that Ms. Truss lacked the backing necessary for it to pass in Parliament.

The news caused the pound to soar, reaching a high of $1.1263 against the dollar before falling.

The repercussions of Mr. Kwarteng’s mini-market-rupeeing budget led to the dollar’s record-breaking decline last week.

On income over £150,000, taxes in England, Wales, and Northern Ireland are collected at a rate of 45%. In Scotland, where income tax is devolved, the higher rate of tax is 46%.

Tax reductions totaling £45 billion were included in the chancellor’s mini-budget, of which £2 billion went toward eliminating the highest rate.

Other actions included the removal of the restriction on bankers’ bonuses, lowering the basic income tax rate to 19%, and a rollback of a recent increase in national insurance.