The 45p tax rate reduction has been cancelled
According to the news this morning, including Bloomberg, the government decided to reverse its decision to reduce the 45p tax rate which was initially announced 10 days ago during the Mini-Budget. Ever since, Liz Truss has faced criticism from many, including members of her own party and a turbulent reaction from markets for several extreme measures in a bid to push for growth.
This morning, the chancellor Kwasi Kwarteng stated on his Twitter account:
“From supporting British business to lowering the tax burden for the lowest paid, our Growth Plan sets out a new approach to build a more prosperous economy.
However, 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 country.
As a result, I am announcing we are not proceeding with the abolition of the 45p tax rate. We get it, and we have listened.
This will allow us to focus on delivering the major parts of our growth package.
First, our Energy Price Guarantee, which support households and business with their energy bills.
Second, cutting taxes to put money back in the pockets of 30 million hard-working people and grow our economy.
Third, driving supply side reforms – including accelerating major infrastructure projects – to get Britain moving.”
According to the Guardian, Liz Truss told the BBC’s Sunday with Laura Kuenssberg programme: “I do accept we should have laid the ground better; I do accept that and I have learnt from that and I will make sure that in future we do a better job of laying the ground.”
She added, “I do think there has been too much focus in politics about the optics or how things look – as opposed to the impact they have on our economy.”.
Truss said she would “stand by” the package unveiled by the chancellor, Kwasi Kwarteng, and the speed with which it was announced.
The overall package of unfunded tax cuts in the mini-budget triggered uncertainty in the City and was criticised by the International Monetary Fund. After a steep rise in the cost of government debt, the Bank of England made a £65bn emergency intervention to restore order.