The Prime Minister of the United Kingdom, Liz Truss, has reversed this Monday in her plan to lower taxes on the richest after her own conservative deputies rebelled against the plan, also criticized by the International Monetary Fund and that had caused the collapse of the pound.
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The British Minister of Economy, Kwasi Kwarteng, has explained that the Government will give up lowering the highest bracket of income tax from 45 to 40%. “It is clear that the abolition of the 45% rate had become a distraction from our primary mission of addressing our country’s challenges. As a consequence, we will not go ahead with its abolition. We understand, and we have listened,” the minister said in a statement.
The fiscal plan presented by Kwarteng on September 23 had created convulsions in the markets due to doubts about London’s ability to assume the public debt generated by the tax cut, in the absence of growth forecasts.
Prime Minister Liz Truss, who took power less than a month ago, still defended this Sunday in an interview with the BBC the decision to lower taxes on the highest income, although she attributed it directly to her finance minister.
The 180 degree turn known this Monday, just hours before Kwarteng delivers a speech at the annual congress of the Conservatives in Birmingham, responds, according to the British media, to the growing threat of deputies Tories to vote against the plan in Parliament. as collected Guardian, excerpts from the speech that Kwarteng had prepared show that the minister had planned to stick to his guns on the tax package. “We must stay the course. I am sure that our plan is the correct one”, the minister was going to say.
But in his statement this Monday, the minister has assured that with the renunciation of lowering the income tax for the richest, he will be able to “focus on carrying out the main parts of the growth package.” Among them, he has cited the plan to help homes and businesses to pay energy bills, which will skyrocket in the coming months as a result of the war in Ukraine.
Kwarteng will also continue with his intention to “cut taxes and put money in the pockets of 30 million people”, in apparent reference to the drop from 20% to 19% of the lowest income tax bracket. And he has signaled that he will push for “supply policy reforms,” including speeding up “major infrastructure projects.”
“I said I have listened. I understand the reaction. I’ve talked to a lot of people from all over the country. I have spoken with the voters. I have spoken with deputies and councilors and other people from our political system. But the most important thing is that I have listened to the voters,” Kwarteng said in an interview with the BBC on Monday.
The pound sterling, which suffered a sharp drop after the announcement last week, rose during the early hours of this Monday after learning that the Government was going to back down, reports Guardian. It reached 1,125 dollars at one point, recovering the levels prior to the announcement of the tax changes, although in the early hours of this Monday it cut part of the gains and stood at 1,119 dollars.
The announcement of tax cuts had also caused criticism from the markets and from the International Monetary Fund last week. In an unusually forceful and critical message, the IMF called tax stimulus “inappropriate” “given the inflationary pressure plaguing the British economy.”
The Economy Minister will deliver his speech this Monday afternoon at the convention center in the English city of Birmingham, where the Tories They celebrate their annual appointment until Wednesday. Truss, who beat Rishi Sunak in the internal elections for the conservative leadership, will address the militancy on October 5, while Foreign Minister James Cleverly and Interior Minister Suella Braverman will do so this Tuesday.
The Truss government faces this congress with the polls against it, as its bad start has given Keir Starmer’s Labor Party its greatest advantage in twenty years, with 54% of the support compared to 21% of the Tories in a recent poll.