The Minister of Finance of the United Kingdom, Kwasi Kwarteng, announced the abandonment of the income tax cut for the richest, announced a few days ago, a measure that caused turmoil in the financial markets and that aroused criticism for being seen as an attempt to favor the wealthiest in the midst of the crisis.
“It is clear that the abolition of the 45 percent tax rate has become a distraction from our mission to address our country’s difficulties. As a consequence, we will not go ahead with its abolition. We understand it, and we have listened,” the minister said in a statement released through the social network Twitter.
Liz Truss, who took office in early September, and her finance minister had announced on September 23 a plan to support households against energy costs, accompanied by large tax cuts. Other cuts were also announced, such as the abolition of increases in corporate tax and social security contributions.
Confused markets
The plan plunged financial markets into turmoil over doubts about London’s ability to take on the public debt generated by the tax cut, in the absence of growth forecasts. The pound plunged to its lowest level in history, and interest rates on UK public debt reached their highest level since the 2009 crisis, threatening the country’s financial stability. The Bank of England had to intervene urgently last week to stabilise the situation.
The 180-degree turn known this morning, just hours before Kwarteng delivers a speech at the annual Conservatives’ congress in Birmingham, responds, according to British media, to the growing threat of “Tory” MPs voting against the plan in Parliament. With the renunciation of lowering the income tax on the richest, the head of Economy considers that he will be able to “focus on carrying out the main parts of the growth package.”
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