Market Turmoil: UK Scraps Tax Cut For The Wealthy

The British government Monday dropped plans to cut income tax for the wealthy and top earners, part of a package of unfunded cuts unveiled only days ago that sparked turmoil on financial markets and sent the UK pound to record lows.

In a dramatic about-face, Treasury chief Kwasi Kwarteng abandoned plans to scrap the top 45% rate of income tax paid on earnings above 150,000 pounds ($167,000) a year.

Kwarteng and Prime Minister Liz Truss have spent the last 10 days defending the cut in the face of market mayhem and increasing alarm among the governing Conservative Party.

“We get it, and we have listened,” Kwarteng said in a statement. He said “it is clear that the abolition of the 45p tax rate has become a distraction from our overriding mission to tackle the challenges facing our country.”

The pound rose after Kwarteng’s announcement to around $1.12 — about the value it held before the September 23 budget announcements.

The U-turn came after a growing number of Conservative lawmakers, including former ministers with broad influence, turned on the government’s tax plans.