The British government has backtracked on its controversial tax plan that has rocked markets and lowered the value of the pound. Although until yesterday Liz Truss defended her strategy tooth and nail and assured the BBC that she was continuing with her plans to lower the highest tax rate, from 45% to 40%, on the highest incomes, now the new cabinet is has undone, as announced by the finance minister, Kwasi Kwarteng.
This reduction of the maximum rate, paid by people who earn more than 150,000 pounds a year, would have meant an additional indebtedness for the British State of 45,000 million pounds, without Kwarteng explaining where the money would come from. In addition, she had been heavily criticized for being unfair at a time when the cost of living was rising.
Kwarteng said his proposals, announced just 10 days ago in the government's so-called mini-budget, had "become a distraction." "We understand and have heard it," he wrote in a statement released Monday morning.
According to the British media and confirmed by former cabinet minister Grant Shapps to the BBC, the government's decision had provoked widespread rejection among the Tory ranks, as was confirmed during the first day of the Conservative Party Congress, which opened yesterday . Truss, who came to power less than a month ago, would face a major Tory rebellion if they tried to force her MPs to vote for the plan in the House of Commons.
The annual congress of the ruling British Conservative Party kicked off in Birmingham amid growing unease in the country following the announcement of the government's fiscal plan to promote growth on September 23. The strategy had created convulsions in the markets due to doubts about London's ability to assume the public debt generated by the tax cut, in the absence of growth forecasts.
In several interviews with local media in the aforementioned English city, Liz Truss had stressed that it was the "appropriate" plan to grow the economy in a "very difficult" global context. Speaking to the BBC yesterday, Truss did admit that by revealing the controversial program of massive tax cuts - without accompanying details of how they intend to reduce the accumulated debt - she should have "prepared the ground better" in relation to those measures.
With the waiver of lowering the income tax for the richest, the head of Economy considers that he will be able to "focus on carrying out the main parts of the growth package." First, he cites the plan to help homes and businesses to pay energy bills, which will skyrocket in the coming months as a result of the war in Ukraine.
Kwarteng will also continue with his intention to "reduce taxes and put money in the pockets of 30 million people", in apparent reference to the drop from 20% to 19% of the lowest income tax bracket. Finally, he notes that he will push for "supply policy reforms," including speeding up "major infrastructure projects."
Kwarteng will give more details about this 180º turn in his appearance at the conservative congress, which is scheduled for 4:00 p.m. local time, at the convention center where the "Tories" celebrate their annual meeting until Wednesday. The Truss government faces this congress with the polls against it, as its bad start has given Keir Starmer's Labor Party its greatest advantage in twenty years, with 54% support compared to 21% of the "Tories" in a poll recent
