Kwateng and Liz Truss take U-urn on taxes on scrapping the 45p tax rate

Words Destiny Fakoya

The PM and Kwasi Kwarteng were coerced into an embarrassing U-turn. They must take additional action if they hope to quell public outrage.

The top income tax rate for the UK's richest earners would have been eliminated under the 45P tax. Chancellor Kwateng made an extraordinary U-turn, admitting that eliminating the 45% tax rate on earnings over £150,000, a move that would have been funded by borrowing, had been a diversion amid widespread criticism. Despite intense pressure to change course, Kwateng and Truss persevered in their course of action. Despite the resulting financial chaos. The U-turn, which was revealed a week and a month into Truss's tenure as prime minister, undercuts their authority.

Kwtaeng and Liz Truss decision to U-turn the 45p tax rate resulted in the rising of the pound as markets responds positively while saving the Treasury a mere £2bn. Amidst, the disarray of policies and packages within the mini-budget, the Chancellor considers further U-turns such as scrapping the cap on bankers’ bonuses. 

Along with other indications of a new period of austerity to pay for the remaining £43 billion in tax cuts in his mini-budget, this also contains a £72 billion debt splurge and a £60 billion benefit support pacakage to help keep households and businesses' winter energy bills low.

The U-turn was due to pressure mounted by the corporations and backbenchers Tories. It begs the question of the counsel rendered to Truss by members of her cabinet- when it's filled with only allies. It becomes quite difficult to create a nuanced picture of the situation at hand which resulted in the drafting of the gratuitous mini-budget in the first place. And the drastic measure taken by the aforementioned to remedy the situation. 

This 45p tax U-turn debacle questions Ms Truss's efforts to emulate Thatcherism within her policies,  and leaves Mr Kwanteng’s position as Chancellor in peril.