Truss makes a 180 degree turn and gives up on lowering taxes on the richest taxpayers

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Truss does a 180-degree turn and gives up on lowering taxes on the richest taxpayers

The British finance minister, Kwasi Kwarteng, promised “the beginning of a new era”, when on September 23 he presented your budget of economic measures. What happened afterwards has been calamitous and culminated in with a rescue intervention of the Bank of England of 65,000 million pounds. One of the most unpopular decisions was the reduction of taxes for the richest. “It will stay”, Prime Minister Liz Truss insisted on Sunday morning on the BBC. Less than 24 hours later, that 5% discount was annulled for those who earn more than 150,000 pounds (172,000 euros) a year. A humiliating backpedaling maneuver to stop the rebellion in the Conservative Party and save the completely discredited government, less than a month old.

 “A little turbulence”

When announcing the resignation Kwarteng did not admit have made a mistake, Nor does he plan to change his strategy. It is simply a question, he came to say, of eliminating a distraction. “ It became clear that the abolition of the 45% had become a distraction from our primary mission of addressing the challenges of our country. We understand and we have listened & rdquor ;, the statement said. After the announcement the pound sterling rose and the markets seemed more stabilized. Asked if he considers he has lost credibility and contemplated resigning, the minister refused & oacute; plan to leave. “Not at all”, he replied. “We are 100% focused on the growth plan”. The abandonment of the sale it weakens Truss's argument that lower taxes are necessary to fuel growth and attract investors, one of his economic foundations.

In Birmingham, where the Conservatives hold their annual meeting, Kwarteng referred to from the podium to the change on the tax reduction hours before as “a little turbulence”. In his speech, with the script rewritten and lasting just 20 minutes, there was no announcement. No details, nor any details, about the terms of his new policy. “The UK needs a new vision” and “growth is the only way to increase opportunities and prosperity”, he affirmed, making it clear that the plan envisaged by the government continues.   

Truss and Kwarteng face rebellion from Conservative MPs, who have seen the party sink in the polls and threatened to vote against the budget in Parliament. At the head of a group of insurgents, two former ministers, Michael Gove and Grant Shapps, had publicly criticized Truss's plan. Shapps rated of “inevitable” the renunciation of the reduction of the tax. Gove is now asking the government not to cut public budgets. The pressures on will not cease. The Conservatives have become a fractional and ungovernable party.

Fanatics 

“Change comes too late for families” and to “remedy the damage that has been done. Economic credibility has been destroyed & rdquor ;, says Rachel Reeves, the Labor party in charge of economic affairs. The 180-degree turn would be insufficient to head off the criticism and restore the confidence of the markets. According to Paul Johnson, director of the Institute of Fiscal Studies (a prestigious independent economic analysis body), the abolition of the tax reduction is only “a small measure of the budget”. Kwarteng has “a lot of work to do yet, if he wants to show a credible commitment to fiscal sustainability”. And unless he makes another resounding change in his plans, the government & ldquo; no other option than to consider cutting public spending & rdquor ;.   

 

A billionaire Conservative Party donor, Gareth Quarry has switched to supporting the Labor Party and donated £100,000 promising more help in the future. Quarry claims that Truss and   Kwarteng are “fanatics”, following “grade school” economic principles.