U.K: PM Liz Truss Abandons Plan To Scrap 45% Bracket For Highest-earning Taxpayers In A Bid To Quell Revolt By Conservative Grassroots

U.K Prime Minister Liz Truss has abandoned a recently-unveiled plan to abolish the 45% top rate of income tax in a bid to quell a brewing revolt among Conservative rank and file over the policy and a turbulent reaction from markets.

“It is clear that the abolition of the 45p tax rate has become a distraction from our overriding mission to tackle the challenges facing our economy,” the chancellor of exchequer Kwasi Kwarteng said in a statement.

“As a result, I’m announcing we are not proceeding with the abolition of the 45% tax rate. We get it, and we have listened.”

The chancellor said he had “decided, along with the prime minister”, that it should go: “We felt that the 45p issue was drowning out a strong package of intervention on energy, a strong package of intervention on tax cuts for people generally.”

The u-turn came despite PM Truss insisting that she would not buckle under the protests from members of her own Conservative party and turbulence in financial markets

The decision to cut the 45% tax paid on incomes over £150,000 ($166,770) to 40% triggered a major rebellion among the members of Truss's party as it was seen as politically suicidal given the cost-of-living crisis that commoners in the country are reeling under.

In what was widely touted as a 'mini budget' that was unveiled last week, Kwarteng announced a series of tax cuts and other fiscal measures to boost the flagging economy,

The measures in the 'mini budget' included a reduction of the basic rate from 20 to 19 % effective April 2023, no stamp duty levy on homes worth up to £250,000, no stamp duty for homes up to £425,000 for first-time buyers, scrapping of a planned corporate tax rise from 19 to 25 percent, cancellation of a proposed National Insurance from November, cancellation of a planned increase in alcohol duty, complete VAT waiver for shopping by overseas visitors and scrapping of bonus cap for bankers.

Responding to the announcement to scrap the tax cut, Rachel Reeves, the shadow chancellor, said that the U-turn has come too late because the mini-budget is already leading to higher mortgages for families. In a statement, she said:

"The prime minister has been forced to abandon her unfunded tax cut for the richest one percent - but it 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." her statement added.

In a rare move, the overall package of unfunded tax cuts in the mini-budget drew criticism from the International Monetary Fund(IMF).

The British pound rose sharply Monday morning in response to the announcement by the U.K. government it was reversing its decision to reduce the top rate of income tax.