Chancellor Kwasi Kwarteng has said that the government will not be going through with plans to scrap the top income tax bracket of 45 per cent on incomes over £150,000 per annum.
Kwarteng said that the measure had become a “massive distraction” for people in what otherwise was “a strong package” of policies outlined in his mini-Budget.
Several Conservative MPs had spoken out against the plan, with former transport secretary Grant Shapps suggesting that it would not pass through the House of Commons.
Senior Conservative Michael Gove also voiced his opposition to it saying that he didn’t believe it was the right thing to do and displayed “the wrong values.”
Now, Kwarteng has said that prime minister Liz Truss has “decided not to proceed with the abolition of the rate” after the government came to terms with the fact that it was “drowning out a strong package”.
The chancellor highlighted that the mini-Budget had included support for households and businesses with energy bills and cuts to National Insurance and the basic rate of income tax, yet the tax cut for the highest earners was being spoken about the most.
Kwarteng insisted that he and the PM had “decided together” not to go through with scrapping the top band and denied that he had considered resigning over the reaction to the measures from the markets and the public.
Kwarteng said: “We've listened to people. And yes, there is humility and contrition in that. And I'm happy to own it.”
For Labour, however, the decision not to abolish the highest tax band does not go far enough, with the party calling for the government’s “whole economic, discredited trickle-down strategy” to be abandoned.
Assessing the decision to U-turn, Shapps said that it “sends a very important signal to the public and also to the markets that we are serious about sound money.”
Indeed, industry bodies have also welcomed the move, with the Confederation of British Industry’s director-general, Tony Danker, warning that it had diverted attention away from economic measures that would help stimulate growth.
