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.”
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From the LeftU.K. scraps tax cut for the rich that sparked market chaos and political backlash
British Prime Minister Liz Truss on Monday ditched her signature plan to cut taxes for the country's top earners after it triggered market turmoil and a huge domestic outcry.
Truss, who is less than a month into the job, proposed removing the top tier of income tax — meaning a saving for people who earn more than 150,000 pounds ($168,000) a year — as part of a set of unfunded economic reforms that caused the pound to fall to historic lows and damaged Britain's economic standing globally.
The pound rose after the announcement to around...
From the RightUK government drops plans for tax cut on wealthy that prompted turmoil on financial markets
The British government has scrapped plans of cutting taxes on the wealthy, a move that prompted turmoil in financial markets and led to record lows for the pound.
Treasury chief Kwasi Kwarteng said Monday he would no longer pursue plans to eliminate the top 45% rate of income tax paid on earnings above 150,000 pounds, or $167,000 a year.
"We get it, and we have listened," he said in a statement, adding that "it is clear that the abolition of the 45p tax rate has become a distraction from our overriding mission...
From the CenterKwasi Kwarteng U-turns on plans to scrap 45p tax rate
The government has U-turned on plans to scrap the 45p rate of income tax for higher earners.
Chancellor Kwasi Kwarteng told the BBC the proposals, announced just 10 days ago, had become "a massive distraction on what was a strong package".
"We just talked to people, we listened to people, I get it," he added.
The decision, which marks a humiliating climbdown for Prime Minister Liz Truss, comes after several Tory MPs criticised the plan.
On Sunday, Ms Truss had said she was committed to the policy.
The plan to...