After the Great Recession, the collapse of the pound and the bleeding of the stock market, UK Prime Minister Liz Truss reversed her decision to raise income tax to 45%.

According to the BBC, UK Chancellor of the Exchequer Kwasi Kwarteng confirmed the news in a statement, “he said that the proposal, announced just 10 days ago in the budget “has become a distraction”.

He added: “Together with the PM, I have decided that the best course of action is not to proceed with the 45p rate cut. We are focused on moving away from the high rate road.

Plans to scrap the 45p rate, paid by people earning more than £150,000 a year, have been criticized as unfair at a time of rising costs.

On Sunday, in an interview with the UK’s state broadcaster, the BBC, Liz was asked: “I am fully committed to scrapping the 45p rate for Are you the richest man in the country?” And Truss replied, “Yes. And that’s part of it, Laura, it’s part of the overall package to make the tax system simpler and lower.”

This move, which is considered a huge increase, could be a major setback for the Truss government, which has only been in power for a month.

His remarks came as a major backsliding from his initial commitment not to surrender. Truss said he was determined to go ahead with the massive tax cut plan because he believed it would make the country more efficient, according to an interview published in the Telegraph.

But it is clear that he did not get support. Either from his party or from the market. The u-turn came after it became clear on the first day of the Conservative party conference that Truss would face a massive backlash if he tried to force his MPs to vote it out. Senior Tory Michael Gove has suggested Parliament should not vote on Liz Truss’s budget, saying “I don’t believe that’s true.” He called it “showing the wrong values”.

He also argued that using borrowed money to finance the tax was “not Conservative”. According to the BBC, dozens of Conservative MPs have now spoken publicly about the microfinance scheme, but privately many are concerned. At the very least, they want a 45p tax cut. Former cabinet minister Grant Shapps has already warned the prime minister that a Commons vote on the proposal will fail.

Last week, the pound fell to a record low of 1.0350 after the UK government’s tax cut plan sparked fears of a financial meltdown and inflation. While the purchase of bonds by the Bank of England on Wednesday helped the money out of his nose.

Truss took some of the blame for the collapse of the market, saying that the government should have put the land better for the package. The International Monetary Fund last week said the tax cuts could worsen inequality and undermine the BoE’s fight against inflation.

Regardless, Kwarteng seems to be doubling down, promising what he calls a new economic deal for the country. “What Britain needs is economic growth. And a government fully committed to economic growth,” he said.

(with agency access)

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