'We get it & we've listened': UK PM Liz Truss backs down amid crisis, rolls back tax move

In a bid to slow down the mounting rebellion from members of the Conservative Party, UK Prime Minister Liz Truss has finally decided to drop the plan to cut taxes for the highest earners. Notably, this decision comes just 10 days after the British PM announced tax cut plans. Taking to Twitter, Chancellor of the Exchequer Kwasi Kwarteng wrote, "We get it, and we have listened," and he also admitted that the decision of the Truss government to scrap the 45% rate of income tax had become a "distraction." 

Retweeting Kwarteng's post, Truss wrote, "We get it and we have listened. The abolition of the 45 percent rate had become a distraction from our mission to get Britain moving." She further wrote, "Our focus now is on building a high growth economy that funds world-class public services, boosts wages, and creates opportunities across the country."

It is to mention that Truss, who took office less than a month ago, promised to reshape UK's economy to end years of sluggish growth. However, the government on September 23 announced a stimulus package that includes 45 billion pounds ($50 billion) in tax cuts, to be paid for by government borrowing, sent the pound tumbling to a record low against the dollar.

Moreover, the Chancellor of the Exchequer said the abolition of the 45 percent tax rate will allow the government to focus on delivering the major parts of the growth package. The Energy Price Guarantee will support households and businesses with their energy bills. "Cutting taxes to put money back in the pockets of 30 million hardworking people and grow our economy," he continued, and the third is "driving supply-side reforms, including accelerating major infrastructure projects to get Britain moving."

Earlier, Liz Truss admitted that she should have "laid the ground better" for tax cuts. "I accept we should have laid the ground better. I have learned a lesson from that," said the British Prime Minister.

'A menu without prices': Labour Party opposed the tax cut plans

The plan was attacked by the opposition Labour Party for favouring the interests of business over working people and failing to provide any analysis about the impact on the government’s fiscal targets. “It is a budget without figures, a menu without prices,’’ said Rachel Reeves, Labour’s spokeswoman on Treasury issues. “What has the chancellor got to hide?” Many economists have expressed concern that the government’s policies will lead to a sharp increase in borrowing, undermining confidence in the British economy.

“This was the biggest tax-cutting event since 1972, it is not very mini,” said Paul Johnson, director of the Institute for Fiscal Studies, an independent think-tank that scrutinises government spending.

UK economic crisis

For the first time in Britain's history, the value of England's currency, the pound, had fallen to a record low against the dollar. Notably, this plunge in the value of the pound has affected bond prices and borrowing costs and has taken pension funds close to the brink of insolvency during the pandemic, CNN reported. The Bank of England has also announced that the UK's inflation is most likely heading to 11%.

Image: AP

With AP inputs