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.
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The markets reacted positively to the announcement with pound rising against the dollar.
Mr Kwarteng 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.”
The Chancellor is only ditching the abolition of the 45p tax rate and vowed to press on with the other aspects of his mini budget bonanza.
In his tweet Mr Kwarteng said the scrapping of the 45p rate will “allow us to focus on delivering major parts of our growth package”.
He 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.”
The pound surged higher in overnight trading on Monday as reports emerged that the Government would U-turn.
Sterling hit 1.125 US dollars at one stage, recovering back to levels seen before the mini-budget, though it pared back some of the gains in early morning trading to stand at 1.119.
Commenting on the screeching u-turn this morning, the Liz Truss 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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This morning, Labour pressed for the PM and Mr Kwarteng to back down on the rest of the mini-budget, despite U-turning on the 45p.
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 said.
After a day of brutal Tory backlash the PM summoned her Chancellor to crisis talks last night, where they drew up plans to ditch the controversial 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”.
Downing Street even warned yesterday that anyone voting against the plans will be kicked out of the party — as a major row erupted on the first day of Tory conference in the home of TV gangster Tommy Shelby’s Peaky Blinders.
But 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.
On Sunday morning Ms Truss risked a rift as she told the BBC 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.”
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 the PM had failed to make a case to abolish the 45p top rate levy during her winning leadership contest.
The Tort heavyweight said the tax plan must be dropped, hinting he would vote against it.
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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.”
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