UK Drops Tax Cut Plan After Pound Collapses

Leaders in the U.K. abruptly abandoned a plan to cut taxes for top earners after it prompted turmoil in financial markets and forced the Bank of England to prop up the value of the pound after it fell to its lowest recorded level.

Recently-elected Prime Minister Liz Truss called the tax plan a “distraction” from the rest of her economic agenda on Monday, just one day after claiming to be “absolutely committed” to the plan. Chancellor of the Exchequer Kwasi Kwarteng also called it a “distraction,” but added, “We get it, and we have listened.” The pound returned to around $1.12 on Monday, about the value it held prior to the announcement of the tax plan. 

Truss’ plan would have abolished the U.K.’s top tax bracket, which taxes income over 150,000 pounds per year at 45% — even as the U.K. faced nearly 10% inflation in the 12 months ending in August. The proposal drew criticism from some members of Truss’ own Conservative Party, and the liberal Labour Party criticized Truss’ entire economic agenda, which included other tax cuts. 

Coverage was widespread across the spectrum on Monday, particularly in business-focused outlets, often describing the reversal as a “dramatic about-face.” Several outlets described the reversal as shameful for the U.K. government; the Financial Times (Center bias) called it “embarrassing,” and several headlines called it “humiliating.”