LIZ Truss has today ditched scrapping the 45p tax rate in a humiliating climb down.
Chancellor Kwasi Kwarteng confirmed the dramatic U-turn in a tweet this morning.
The markets reacted positively to the announcement with pound rising against the dollar.
He wrote: “We get it, and we have listened.”
The Sun last night exclusively revealed the PM and Chancellor were planning to ditch the tax – with Mr Kwarteng this morning telling the BBC: “What was clear, talking to MPs, voters, constituents, that the 45p rate was becoming a huge distraction on a very strong plan.”
Kwarteng is only ditching the abolition of the 45p tax rate and vowed to press on with the other aspects of his mini budget.
In his tweet, the Chancellor said the scrapping of the 45p rate will “allow us to focus on delivering major parts of our growth package”.
Mr Kwarteng added this included the government’s Energy Price Guarantee which supports households and businesses with their energy bills.
The Chancellor also said he’s determined to keep cutting taxes “to put money back in the pockets of 30 million hard-working people and grow out economy.”
Commenting on the screeching u-turn this morning, the PM tweeted: “We get it and we have listened. The abolition of the 45pc rate had become a distraction from our mission to get Britain moving.
“Our focus now is on building a high growth economy that funds world-class public services, boosts wages, and creates opportunities across the country.”
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Labour pressed for Liz Truss and Kwasi Kwarteng to back down on the rest of their tax-cutting mini-budget despite their massive U-turn.
Shadow chancellor Rachel Reeves said the reversal “comes too late for the families who will pay higher mortgages and higher prices for years to come”.
“The Tories have destroyed their economic credibility and damaged trust in the British economy,” she added.
After a day of brutal Tory backlash the PM summoned her Chancellor to crisis talks where they drew up plans to ditch the controversial tax cut for people earning £150,000 and over.
The surrender will be a body blow to the new government just hours after Truss defended the move on TV as the “right thing to do”.
It followed a day of bitter Tory acrimony at the opening of their party conference in Birmingham.
It roared into action yesterday with Tory big beasts trading extraordinary blows over last month’s tax-cutting mini-budget.
After days of market turmoil and MPs’ jitters the PM finally admitted she had blundered and should have “laid the ground better” for her tax plans — but said she “had to act”.
The pound fell against the dollar after the mini-budget, but then did claw its way back up towards the end of the week.
And against doom-laden forecasts, the UK economy avoided going into recession.
The PM yesterday risked a rift as she said slashing taxes for the richest earners “was a decision that the Chancellor made”.
Former Culture Secretary Nadine Dorries said on Twitter: “One of Boris Johnson’s faults was that he could sometimes be too loyal and he got that. However, there is a balance and throwing your Chancellor under a bus on the first day of conference really isn’t it.”
Downing Street warned anyone voting against the plans will be kicked out of the party — as a major row erupted on the first day of the gathering in the home of TV gangster Tommy Shelby’s Peaky Blinders.
Mrs Truss told the BBC: “I do want to say to people, I understand their worries about what has happened this week. And I do.
“I do stand by the package we announced and I stand by the fact that we announced it quickly because we had to act.
“But I do accept we should have laid the ground better. I do accept that. I have learned from that. And I will make sure that in future we do a better job of laying the ground.”
In a day of open civil war, the PM;
- ADMITTED she did not consult Cabinet Ministers before scrapping the 45p rate of tax;
- REFUSED to confirm that benefits would rise in line with inflation;
- HINTED swingeing spending cuts were on the way to reduce borrowing.
Appearing live on Sunday morning TV with the PM, Michael Gove launched an explosive attack saying Ms Truss had failed to make a case to abolish the 45p top rate levy during her winning leadership contest.
Mr Gove said the tax plan must be dropped, hinting he would vote against the plan.
He said she should only stick to halting the corporation tax rise and reversing the National Insurance rise.
Mr Gove said: “Now, personally I’m wary of the changes that she’s making in both those areas but she did win on that basis. But what was not discussed during the Conservative leadership election was the prospect of income tax cuts for the wealthiest.”
He added: “You need to make sure that the changes that we make are in tune with the values on which Boris won the 2019 election, which are looking after the most vulnerable in our society.”
Meanwhile, former Chancellor George Osborne revealed it was “touch and go whether the Chancellor can survive”.
Speaking to Channel 4’s The Andrew Neil Show, he said if Mr Kwarteng’s speech goes badly tomorrow “it’s curtains”.
Meanwhile, Mr Kwarteng will attempt to calm the financial markets following a week of turmoil following his announcement.
His “growth plan” was heavily criticised by the IMF and the Bank of England had to intervene with a £65billion injection to prop up pension funds on the verge of collapse.
Mr Kwarteng will tell delegates: “I refuse to accept that it is somehow Britain’s destiny to fall into middle income status or that the tax burden reaching a 70-year high is somehow inevitable.
“It isn’t, and shouldn’t be. We needed a new approach, focused on raising economic growth.
“We must stay the course. I am confident our plan is the right one.”
The Chancellor will set out a “new economic deal” for the country to help manage debt with an “iron-clad commitment to fiscal discipline” as he strives for 2.5 per cent growth.
But Conservative Party chairman Jake Berry has warned the Tories face an uphill struggle to win the next election, saying “it’s time to deliver, deliver, deliver” on the promises made in the 2019 election.