The annual conference of the Conservative Party of Great Britain in Birmingham
British Prime Minister Liz Truss and Finance Minister Kwasi Kwarteng at the Conservative Party’s annual conference in Birmingham, England, on October 2, 2022.


The new British government refused plans to cut income tax for top earnerspart of a package of unfunded cuts that caused turmoil in the financial markets and sent the pound to record lows.

Finance Minister Kwasi Kwarteng said on Monday he would not scrap the 45 percent income tax rate paid on incomes above 150,000 pounds ($167,000) a year.

“We understand that and we are listening,” he said in a statement, adding that “it is clear that the removal of the 45p tax rate has distracted from our core mission of addressing the challenges facing our country.”

The U-turn comes after a growing number of lawmakers from the ruling Conservative Party rejected the government’s tax plans announced 10 days ago.

It also came hours after the Conservatives released preliminary excerpts of a speech Kwarteng is due to deliver later on Monday at the party’s annual conference in the central English city of Birmingham. He should have said, “We have to stay the course. I’m sure our plan is right.”

Prime Minister Liz Truss defended the measures on Sunday but said she could “do a better job of laying the groundwork” for the announcements.

Quarteng told the BBC that the focus on the top tax rate had become a “big distraction” but said he had not considered resigning, according to Agence France-Presse.

“I’m very glad we decided not to go ahead with it because it drowns out elements of a great plan,” he said.

In a tweet early Monday, Truss also said the tax rate “has become a distraction from our mission to get Britain moving”.

Truss took office less than a month ago, promising a radical overhaul of Britain’s economy to end years of sluggish growth. But on September 23, the government announced a stimulus package that includes 45 billion pounds ($50 billion) in tax cuts to be paid by government borrowing, sending the pound to a record low against the dollar .

The Bank of England was forced to step in to prop up the bond market and fears that the bank would soon raise interest rates prompted mortgage lenders to withdraw their cheapest deals, causing turmoil among homebuyers.

The cuts were unpopular even among conservatives. Cutting taxes for the highest earners and lifting the cap on bankers’ bonuses, while millions face a cost-of-living crisis caused by skyrocketing energy bills, has been widely seen as politically toxic.

Truss and Quarteng insisted their plan would grow the economy and ultimately bring in more tax revenue, offsetting the cost of borrowing to finance the cuts. But they also made it clear that government spending would have to be cut.

Kwarteng said the government is sticking to its other tax policies, including lowering the basic income tax rate next year and reversing the corporate tax increase planned by the previous government.

The pound rose after Quarteng’s announcement to about $1.12 – roughly the level before the September 23 budget announcement.