Liz Truss and Kwasi Kwarteng have abandoned a plan to abolish the top rate of income tax for the highest earners in an astonishing U-turn.
The Chancellor acknowledged that their desire to axe the 45% rate on earnings over £150,000 in a move to be paid for by borrowing had become a “distraction” amid widespread criticism.
He issued a statement, hours before he had been due to defend the plans at the Conservative Party conference, saying: “We are not proceeding with the abolition of the 45p tax rate.”
“We get it, and we have listened,” he added.
Talking to BBC Breakfast, the Chancellor said: “I have been in Parliament for 12 years, there have been lots of policies which, when government listens to people, they have decided to change their minds.”
Asked where the U-turn had left his credibility, Kwasi Kwarteng said: “We are 100% focused on the growth plan.”
Had he considered resigning? “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.”
The U-turn will be seen as a massive blow to their authority, coming a little over a week after they were announced and just a month into Ms Truss’s premiership.
The pair had been under pressure, including from senior Tory MPs, to back down on the measure announced in the mini-budget on September 23.
But instead they doubled down on it despite the financial turmoil triggered by the package, with the Prime Minister defending it as recently as yesterday (Sunday).
They had even resisted backing down in the face of criticism from the International Monetary Fund and a £65 billion emergency intervention by the Bank of England to restore order.
Spending around £2 billion annually on a tax cut for top earners while scrapping the cap on bankers’ bonuses was seen as politically toxic while millions face the squeeze of the cost-of-living crisis.
Former Conservative Cabinet minister Grant Shapps said cutting the 45p tax rate “could never have worked”.
Speaking to BBC Radio 4’s Today programme amid speculation the Government will U-turn on the proposal to cut the top rate of tax, Mr Shapps said: “I sensed that things were moving very rapidly last night. Frankly, it was inevitable.
“And I think you know the idea that you could whip everybody into line or delay this until next spring and change the outcomes, which was one of the suggestions, a couple of the suggestions yesterday, completely untrue. This could never have worked.”