Liz Truss and Kwasi Kwarteng have abandoned their plan to abolish the 45p top rate of income tax for top earners in a dramatic U-turn.
Mr Kwarteng said in a statement posted on Twitter that “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”.
He said: “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.”
The U-turn comes after a number of senior Conservatives, including Michael Gove, expressed significant concerns about the policy amid fears the Government could struggle to get the change through the House of Commons at a crunch vote.
Mr Gove said yesterday that Ms Truss was “betting too much on tax cuts” funded through borrowing as he called for the 45p move to be reversed.
Ms Truss had only yesterday defended the cut as she argued it would make the tax system “simpler and lower”. She also said the 45p rate of income tax “raises very little” in revenue.
Follow the latest updates below.
Cabinet ministers kept in the dark over U-turn
The decision to scrap the 45p tax rate abolition was taken late at night in a meeting in Liz Truss’s conference hotel suite, writes Ben Riley-Smith, The Telegraph’s political editor.
Kwasi Kwarteng, the Chancellor, met the Prime Minister at the end of a long day of speeches and events defending the measure.
“It wasn’t worth the pain of keeping it”, a Number 10 source familiar with that discussion in the Hyatt at Birmingham said. “It had become a distraction from the brilliant stuff in the growth plan.”
Some Cabinet ministers who were never consulted before the initial move was taken were again in the dark about the decision to remove it. One Cabinet minister told The Telegraph they were only informed by a call around 7am this morning, just moments before Mr Kwarteng announced the change in public.
‘With hindsight it probably wasn’t the best day to go’
Kwasi Kwarteng was asked about his decision to attend a party with hedge fund managers after delivering the mini-Budget and he said with hindsight “it probably wasn’t the best day to go”.
Asked why he had attended the party, Mr Kwarteng told LBC Radio: “I spent I think quarter of an hour there, maybe a bit longer, and it was a party event. We have party events all the time, a Conservative Party event, which had been booked in for a few weeks actually.
“As you remember, it was a very difficult time because we had Her Majesty’s passing, we had the funeral, there were dates moving around and the date of that seemed to coincide with the mini-Budget.”
Asked if with the benefit of hindsight it was a good decision to attend, he said: “I think it was a difficult call and I totally get how it looks and I just feel that it was something that I was signed up to do and I had to do.”
Asked again if it was a smart move, he said: “With hindsight it probably wasn’t the best day to go.”
Kwasi Kwarteng unable to rule out further U-turns
Kwasi Kwarteng, the Chancellor, was asked three times to rule out further mini-Budget U-turns but he refused to do so.
Asked if there will be more U-turns, potentially on the decision to lift the cap on bankers’ bonuses, Mr Kwarteng told LBC Radio’s Nick Ferrari: “I have said what I have said about the 45p rate and I am totally focused on delivering the growth plan.”
Asked for a second time, Mr Kwarteng said: “We are totally focused on delivering the growth plan.”
Asked for a third time, the Chancellor said: “We are totally focused on the growth plan.”
Nicola Sturgeon accuses UK Government of ‘utter ineptitude’
Tory anger over U-turn
Some Tory MPs are clearly angry with Kwasi Kwarteng and Liz Truss after more than a week spent defending the 45p tax cut policy.
Asked for their reaction, one veteran backbencher said: “Much I’d like to say, but as my late mother used to say – if you’ve got nothing good to say, best to say nothing.”
Kwasi Kwarteng: ‘These things happen in politics’
Kwasi Kwarteng said “these things happen in politics” as he defended the Government’s decision to perform a U-turn on dropping the 45p top rate of income tax.
Asked how embarrassed he was by the U-turn, the Chancellor told LBC Radio: “Look, you know politics and we have had lots of reversals, Marcus Rashford’s campaign, all sorts of things. These things happen in politics.
“Actually what is big and what we should be focused on is actually listening to people because it is very easy to stick our heads in the sand as politicians and say we are just going to carry on regardless.”
‘I don’t think that is the case at all’
Kwasi Kwarteng was told during an interview with LBC Radio that if he had made a “mistake” of the same magnitude in other industries he would likely have lost his job.
The Chancellor said: “I don’t think that is the case at all. I think people actually have the maturity to learn from things that haven’t gone right and also in politics, absolutely in politics, you have to listen to people, you have to understand you are not going to get 100 per cent of things right all of the time.
“When you listen you do have, in the spirit of humility, to take on board what people are saying and I figured that this 45p rate was a huge distraction on a good plan and we decided not to proceed with the abolition.”
‘You need to take people with you’
Brendan Clarke-Smith, one of the most strident low-tax Tories on the backbenches, said Kwasi Kwarteng had “probably” made the right decision this morning by dropping the plans to axe the 45p top rate of income tax.
“It’s not a bad policy, but you need to take people with you,” he said.
“And about 95 per cent of everything else is in place.”
Business chiefs welcome tax U-turn
Tony Danker, the director general of the Confederation of British Industry, has welcomed the Chancellor’s decision to U-turn on cutting the 45p tax rate.
He told BBC Radio 4’s Today programme: “Here was a package with some really strong economic reforms that businesses have been waiting for for years in fact and clearly, politically the 45p had become a distraction, and probably more importantly businesses up and down the country want the markets to stabilise, that is an absolute pre-condition to investment and growth.
“And it’s a pre-condition to getting on to these very good reforms, so yes I think it’s a good development this morning.”
PM accused of having ‘political tin ear’
Tory MPs are now starting to respond to the U-turn.
Michael Fabricant accused Liz Truss and Kwasi Kwarteng of having a “political tin ear” over the 45p tax cut policy.
The MP for Lichfield said: “The mistake should not have happened in the first place. The 45p tax cut did make economic sense, but showed a political tin ear.”
Ben Bradley, the MP for Mansfield, added: “Any U-turn is frustrating because of course we all get asked to defend a policy just to then defend not doing it.
“In principle I’m all for low taxes, but it’s fair to say this has all run away with itself in the last week and everyone is talking about this rather the massive £60bn welfare intervention on the cost of living or about growth. It’s definitely been a distraction. Whether it’s the right decision, time will tell.”
Grant Shapps: 45p was ‘crowding out’ other policies
Grant Shapps, the former transport secretary, said the 45p tax issue was “crowding out” other Government policies.
Speaking to BBC Breakfast just before the Government announcement, Mr Shapps said: “I’d spoken to the Chancellor and I’d spoken to the Prime Minister over the weekend and said that actually you know, knocking on doors, it was very, very clear that this 45p issue was actually clouding out, crowding out, all the other good stuff, like that massive energy cap, which is designed to help millions of people.”
He said that people on the doorstep had told him that the money the Government is borrowing “is one of reasons why these mortgage rates are going up”.
Labour: Tax cut U-turn ‘too late for families’
Rachel Reeves, the shadow chancellor, said the Government’s U-turn on the top rate of income tax has come “too late” for families who are already facing higher mortgage repayments.
She said: “The Prime Minister has been forced to abandon her unfunded tax cut for the richest one per cent – 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. There’s no plan to clear up the mess of 12 years of Tory government. They’re making it up as they go along. This is not over – it’s not just some distraction. They need to reverse their whole economic, discredited trickle down strategy.
“Their kamikaze Budget needs reversing now. As the party of fiscal responsibility and social justice, it will come to the Labour Party to repair the damage this Tory government has done.”
Liz Truss: ‘We get it and we have listened’
Lib Dems: U-turn is ‘humiliating’
Sir Ed Davey, the leader of the Liberal Democrats, has described the U-turn on scrapping the top rate of income tax as “humiliating”.
He said: “This humiliating U-turn comes too late for the millions seeing their mortgage rates soar because of this botched budget.
“The Conservatives must now cancel their conference and recall Parliament, to sort out this mess for the sake of the country.”
Kwasi Kwarteng refuses to say tax plan was a ‘mistake’
Kwasi Kwarteng would not describe the initial decision to scrap the 45p tax rate as a “mistake” despite this morning’s U-turn.
Asked if he was willing to admit it was a mistake, the Chancellor told BBC Breakfast: “What I admit is that it was a massive distraction on what was a strong package.”
Asked again if the policy was a mistake, Mr Kwarteng would not be drawn as he repeated his line that the policy had become a “huge distraction”.
Kwasi Kwarteng ‘has not considered resigning’
Kwasi Kwarteng said he has not considered his position in the wake of the income tax U-turn.
He told BBC Breakfast: “Not at all. What I am looking at is the growth plan and delivering what is a radical plan to drive growth in this country, to reduce taxes, to put more money that people earn in their pockets.”
Chancellor: Dropping tax cut ‘best course of action’
Told that the decision to drop the 45p cut represented the biggest U-turn by a government in recent history, Kwasi Kwarteng said he is “100 per cent focused on the growth plan”.
He also argued that in his 12 years as an MP in Parliament many governments have changed their minds about policies and dropped them.
He said he and Liz Truss had agreed that dropping the plans was the “best course of action”.
Asked when he had spoken to the Prime Minister about dropping the tax cut, the Chancellor said they “talk constantly” about the Government’s plans for the economy.
Kwasi Kwarteng: 45p row was ‘drowning out’ rest of growth plan
Kwasi Kwarteng, the Chancellor, said it was “clear” from talking to voters and MPs that the 45p income tax cut was becoming a “huge distraction on what was a very strong plan”.
He said it was “simply a distraction from what was a good set of policies”.
Told that Liz Truss only yesterday had said she was fully committed to the policy nd asked why the Government had decided to perform a U-turn now, Mr Kwarteng told BBC Breakfast: “We just talked to people, we listened to people, I get it.”
He said the row over the 45p additional rate was “drowning out” the rest of the package.
Kwasi Kwarteng announces U-turn on dropping 45p top rate
What Liz Truss said yesterday about the 45p tax decision
Liz Truss insisted only yesterday that she was committed to proceeding with her decision to scrap the 45p additional rate of income tax.
Asked during an interview with the BBC’s Laura Kuenssberg if she was “absolutely committed to abolishing the 45p tax rate for the wealthiest people in this country”, Ms Truss said the following:
“Yes. And it is part, Laura, it is part of an overall package of making our tax system simpler and lower. But I think it’s worth noting, in the package we announced the vast majority of that package is the energy package… the 45p rate actually raises very little and makes our tax system more complicated.”
Grant Shapps ‘strongly welcomes’ income tax ‘reversal’
Grant Shapps, the former Transport Secretary, has said he “strongly welcomes” the Government’s reported U-turn on scrapping the 45p additional rate.
He wrote in The Times overnight that he believed getting rid of the top rate of income tax at this time was the “wrong priority”.
A major story is emerging in Birmingham this morning, with reports that the Government is set to scrap its plans to get rid of the 45p top rate of income tax.
It would make sense given the scale of the Tory rebellion against the move which was unveiled as part of the mini-Budget.
However, if confirmed, it would represent a massive U-turn which will inevitably do huge damage to Liz Truss’s premiership.
I will guide you through the developments as they happen.