Why the UK government backtracked on plans to cut taxes on the rich

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BBC News World

8 hours

image source, Stephen Rousseau

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Kwasi Kwarteng, Minister of Economy and Lis Truss.

Britain has backed away from plans to scrap the 45% income tax rate paid by the country’s richest.

Finance Minister Kwasi Kwarteng told the BBC on Monday that the plan had become a “big distraction” from what he said was a “strong” economic package.

The decision, which many saw as an embarrassment to newly appointed Prime Minister Liz Truss, came after several MPs from her party criticized the plan.

This Sunday, Truss vowed to uphold the controversial move.

The plan to scrap the 45% income tax rate paid by people earning more than 150,000 pounds ($168,000) a year is part of a package of tax cuts announced by the Truss government 10 days ago to boost the country’s economy.

But the financial package led to several days of financial crisis The value of the pound against the dollar has led to an all-time low.

Some of the country’s biggest lenders have halted mortgage deals amid the ensuing uncertainty.

“We are talking to the people, we are listening to them,” the minister said on Monday morning in reports on the morning television program. BBC Breakfast.

It would have represented an income tax cut for the rich A tax savings of nearly US$3,400 per year A person earns 200,000 pounds ($224,000) a year.

The government backed the move by saying that cutting taxes on the wealthy would make Britain more competitive and encourage start-ups and investment.

“Humiliation, wounded and weak”

The BBC’s political editor Chris Mason insists the change in the government’s plans will “humiliate, hurt and weaken” the chancellor and prime minister.

“But Liz believes Truss (change in direction) will create space to move forward and help us get out of the political deadlock that led to the collapse of the budget announcement while in touch with political reality,” he adds.

image source, EPA

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Kwasi Kwarteng, UK Chancellor of the Exchequer.

For its part, Labour, in opposition, called on the government to withdraw its entire economic strategy.

Labor deputy Rachel Reeves promised a change in plans.Too late“Now households will have to pay higher mortgages in the coming years, as a result of the fall in the pound and a possible rise in interest rates in the country.

Ed Davey, leader of the Liberal Democrats, called for the minister’s resignation. Credibility“And the whole project needs a revamp.

Other measures announced in the government’s mini-budget include a reduction in the basic income tax rate from 20% to 19% and the controversial removal of a cap on incentives or salary bonuses for bankers, which can sometimes exceed a million dollars.