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UK PM Liz Truss scraps tax cut for the wealthy that caused market chaos

LONDON (AP) — British Prime Minister Liz Truss on Monday abandoned her flagship plan to cut taxes for the country’s top earners after it sparked market turbulence and widespread domestic protest.

Truss, who has been in office for less than a month, has proposed scrapping the top tier of income tax — meaning savings for people earning more than 150,000 pounds ($168,000) — as part of a package of unfunded economic reforms that caused the pound to fall to record lows and damaged Britain’s economic position globally.

The dramatic change comes just hours after Truss defiantly defended the tax cut and her broader right-wing economic agenda to activists from the ruling Conservative Party, saying it was necessary to solve the country’s long-term economic problems. Facing a growing political rebellion after days of economic chaos, the government said Monday morning that it was abandoning the plan.

“We understand and have heard,” Truss and his embattled finance minister, Kwasi Kwarteng, said on Twitter.

The abrupt change of course comes as the Conservatives meet in Birmingham for an annual conference, normally a morale-boosting event for campaigners, to discuss the party’s priorities for the coming year.

Instead, the party is in an embarrassing retreat with the centre-left opposition Labor Party leading by 20% in opinion polls. Even as Truss defended the policy over the weekend, a growing number of senior lawmakers in his party signaled they would vote against it if it came to that.

The plan to cut taxes for the wealthy was part of a broader “mini-budget” announced shortly after the new administration took office. Aimed at boosting economic growth, he proposed broader tax cuts and regulations in a £45bn ($50bn) package that was unfunded, leaving Britons wondering what already overstretched public services could be cut to save money.

The move drew a rare rebuke from the International Monetary Fund, which has urged the government to “re-evaluate” a plan that may fuel already rising inflation and increase economic inequality.

With the country already facing a bleak winter of soaring energy bills and food prices, critics accused Truss of having lost her priorities.

Last week, Truss underwent a memorable round of interviews with local radio stations, in which he hesitantly attempted to defend the measures.

A BBC presenter in Nottingham described reducing income tax to the top rate as a ‘reverse Robin Hood’ policy, asking Truss: “Why don’t you put your hands up and say, ‘This is a disaster, we messed up and you’re going to do something different?'”

Days later the government is, although it may be too late to avoid long-term political and economic consequences.

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