London, Oct. 4, (PA Media/dpa/GNA) – British Prime Minister Liz Truss is standing by finance minister Kwasi Kwarteng after they abandoned their plan to abolish the top rate of income tax for the highest earners in an astonishing U-turn.
Downing Street said on Monday Truss continues to have confidence in Chancellor Kwarteng, despite the humiliating move to avert a Conservative Party rebellion over their widely criticized strategy.
Kwarteng told his Conservative Party’s conference: “What a day. It has been tough but we need to focus on the job in hand.”
The chancellor earlier acknowledged that their desire to borrow billions to axe the 45% rate on earnings over £150,000 ($168,000) had become a “terrible distraction” amid widespread criticism.
He issued a statement saying: “We are not proceeding with the abolition of the 45p tax rate.
“We get it, and we have listened,” he added, in language echoed in a tweet from the prime minister less than 24 hours after she said she remained absolutely committed to the cut.
The U-turn will be seen as a massive blow to their authority, coming a little over a week after the tax cut was announced in a mini-budget and just a month into Truss’s premiership.
Kwarteng said he had “not at all” considered resigning despite scrapping a key part of the financial plans he set out on September 23.
Asked if Truss has confidence in her chancellor, the prime minister’s official spokesman told reporters: “Yes.”
Business Secretary Jacob Rees-Mogg, a day after defending the policy, also stood by Kwarteng, saying “of course he shouldn’t resign” and it was not a “handbrake turn.”
“It was a political reality. Sometimes things we want to do don’t receive the approbation of the nation that you would hope for,” he told a Telegraph newspaper event at the conference.
“There is no point in sticking with them stubbornly if there simply isn’t the desire and appetite to do them. We live in a democracy and politicians have to be responsive to the democratic will.”
Rees-Mogg said the climbdown was a “sound and fury that signifies nothing,” arguing it was the tax cut that would have lost the Treasury the least amount of money.
Paul Johnson, the director of the Institute for Fiscal Studies think tank, said the reversal of the policy that would have cost £2 billion a year was only a “rounding error in the context of public finances.”
With around £43 billion of unfunded tax cuts remaining, Johnson warned: “The chancellor still has a lot of work to do if he is to display a credible commitment to fiscal sustainability.
“Unless he also U-turns on some of his other, much larger tax announcements, he will have no option but to consider cuts to public spending: to social security, investment projects, or public services.”
The chances of a House of Commons Conservative (Tory) revolt diminished, with former Cabinet minister Michael Gove suggesting he could now support the package and fellow potential rebel Grant Shapps welcoming the U-turn.
Asked if he would now vote for the rest of the package, Gove told Times Radio: “Well yeah I think so on the basis of everything that I know.”
Shapps, a former transport secretary and a renowned strategist, told BBC Breakfast: “I’m very pleased to see him acknowledging that they understood it was the wrong move and fixing that problem.”
The chancellor declined to directly apologize to the nation for the financial turmoil and rising mortgage rates and to Tory MPs who had been warned they could be kicked out of the parliamentary party for voting against the tax plans.
Instead he told BBC Radio 4’s Today programme: “There’s humility and contrition and I’m happy to own it.”
Kwarteng suggested he had told Truss they needed to back down amid signs of a growing rebellion from Conservative MPs.
“The conversation about the 45p rate was this terrible distraction really from what was a very, very strong plan and I’m very pleased that we’ve decided not to proceed with that because it was drowning out the elements of an excellent plan,” he told BBC Breakfast.
Labour opposition finance spokeswoman Rachel Reeves called for them to reverse “their whole economic, discredited trickle-down strategy” as she said the U-turn had come “too late for the families who will pay higher mortgages and higher prices for years to come.”
GNA