STORY: British Prime Minister Liz Truss has been forced into a humiliating U-turn over tax plans, just as her own party conference begins.
On Monday (October 3), she dropped a move to cut the country’s highest rate of income tax.
The reduction was part of a wider growth plan that caused turmoil on financial markets and sparked a rebellion in her own party.
Only on Sunday (October 2), Truss had gone on TV to defend the plan.
But the following morning finance minister Kwasi Kwarteng confirmed a change of direction:
“We just talk to people. We listen to people. I get it. We not only talked to people, we saw people's reactions. We were talking to constituencies. We were talking to a whole range of stakeholders. And we felt that the 45p issue, the 45p rate, was drowning out a strong package of intervention on energy, a strong package of intervention on tax cuts for people generally. And we decided not to proceed with getting rid of the 45p rate"
Monday’s move is unlikely to end all the government’s troubles.
The top tax plan accounted for only a sliver of tax cuts totalling £45 billion, or around $50 billion.
Investors have expressed alarm over the scale of the move, sending the pound and UK bonds tumbling and forcing the Bank of England to intervene.
Bond yields remain elevated, with ministers under pressure to explain how the tax cuts will be funded.
Monday’s news bought only limited relief for sterling too.
The pound was up around 0.5% versus the dollar in early trades.