Dramatic reversal of UK’s tax cut for the wealthy

In an embarrassing turn of events for the Liz Truss government, while insisting late into Sunday night that they were going to stick with the plan to massively cut the tax rate for the wealthy that they had announced with pride but had sent the country reeling in all manner of ways, the government announced very early Monday morning, on the first day of the Conservative party conference, that they were scrapping it. They were clearly rattled by the rumblings of a rebellion by the party faithful at the conference that suggested that the measure might be defeated in parliament.

This article describes what happened on Sunday evening.

Just over half an hour later, the prime minister set out her philosophy on taxes to the party faithful at a drinks party on the 25th floor of the upmarket Cube building in Birmingham. “Frankly, we haven’t made enough conservative arguments for the past few years,” she told them.

Tory members knocked back glasses of champagne and some compared her to Margaret Thatcher for doubling down so rigidly on her plan to cut the top 45p tax rate. Just over 12 hours earlier, Truss had insisted to the BBC’s Laura Kuenssberg she was standing her ground, prompting Michael Gove to go public with his criticism.

Shortly after the prime minister’s television appearance, Kwasi Kwarteng’s team sent out a preview of his conference speech in which he was due to say: “We must stay the course. I am confident our plan is the right one.”

[The chancellor] then had a quick dinner with senior journalists from the Sun newspaper at the Malmaison hotel, before being dropped back at the conference zone where at 10pm he joined Truss and their closest aides in her suite at the Hyatt hotel in Birmingham.

The mood was said to have been grim as the pair compared notes on their conversations with Tory MPs. They agreed to meet again after the prime minister’s drinks at the Cube, and reconvened at around 11pm just as damaging headlines on the Tory mutiny began to drop. They knew what they had to do: dump the policy immediately. It was agreed the chancellor would kill it off in his morning interviews.

Downing Street aides were forced to work into the early hours of the morning to prepare for the 7am announcement, although several Treasury officials admitted the first they heard of the U-turn was when they woke up in the morning and saw the news.

The Treasury chief secretary, Chris Philp, was informed and while unhappy about being blamed for being the person behind the policy, was described by one source as a “Duracell bunny” for his performance on the morning round.

We now have the always entertaining spectacle of politicians who once proudly announced and championed a policy that they thought was a good idea and sought to get credit for it, now not only scrambling to distance themselves when that same idea turns out to be a stinker, but also from the decision to reverse it. They now act as if the idea for the tax cut materialized out of the aether and then just as mysteriously disappeared.

The chancellor obfuscated when he was asked on BBC Breakfast, LBC Radio and then the Today programme who had made the final decision. First, he said Truss had “decided not to proceed with the abolition” before, moments later, adding: “No, we talked together, I said this is what I was minded to do and we decided together.”

Thanks to commenter John Morales, I came across this interview with the chief secretary of the Treasury Chris Philp who squirmed and wriggled and obfuscated when asked a simple question: Whose idea was it to have this tax cut?

This is a wonderful example of the old saying ‘success has many fathers, failure is an orphan’ that has been attributed to president Kennedy after the Bay of Pigs fiasco but is a paraphrase of older ideas.

But there is more to come. Apparently due to the other tax cuts in his ‘mini budget’, Kwarteng is now going to focus on spending cuts, especially on benefits, that is also likely to be highly unpopular with the public. But since those are unlikely to roil the business and financial sectors, which is what the servants of the oligarchy really care about, stopping those is going to be harder.

Senior MPs warned of further rebellions over reductions in public spending, especially on benefits, which the chancellor has declined to rule out.

The threat came as the Institute for Fiscal Studies (IFS) and the Resolution Foundation said there would need to be significant cuts in public spending unless there were further U-turns on policies announced in the mini-budget last month.

Kwarteng said the government was committed to its radical agenda – and would move soon to deregulate sectors including childcare, agriculture, immigration, planning and financial services.

But he also said the government would take fiscal discipline seriously, saying they were “absolutely committed to being serious custodians of the public purse”.

The Resolution Foundation said that despite Monday’s U-turn, the richest households would still gain almost 40 times as much as poorer families from policies announced in the mini-budget.

“Unless further U-turns are made, the chancellor will need to announce significant spending cuts on 23 November. The scale of those spending cuts is largely unchanged by today’s U-turn,” the thinktank said before the date of the fiscal statement was brought forward.

Paul Johnson, the director of the IFS, said there would still need to be a significant cut to spending in order to balance the books. “Unless he also U-turns on some of his other, much larger tax announcements, he will have no option but to consider cuts to public spending – to social security, investment projects, or public services,” Johnson said.

The statement about them being being “serious custodians of the public purse” was eminently risible since their tax cut proposals are a serious kick in the guts to the ‘public purse’.


  1. sonofrojblake says

    There are two and a bit years to go until the last moment we could have a general election.

    Right now, I’ll be impressed if Truss lasts two and a half months. I’ve said already that most of her own party despise her. That was before the shitshow of the last couple of weeks.

  2. ardipithecus says

    This ‘U-turn’ reduces a 45 billion pound revenue reduction to 43 billion. Whoop- de-do.

  3. Pierce R. Butler says

    … there would still need to be a significant cut to spending in order to balance the books.

    Does the UK government actually run a balanced, pay-as-you-go, zero-deficit budget?

    Does any modern nation?

  4. seachange says

    If they’re talking about “needing” to make cuts then “U-turn” massive marketing that word, it is a fake news big lie.

  5. Dunc says

    Does the UK government actually run a balanced, pay-as-you-go, zero-deficit budget?

    No, but there’s a limit to how far (and for what reasons) they can push the deficit before the markets get spooked, at which point borrowing costs start going up -- and since borrowing costs are themselves a large chunk of the deficit, that can get nasty quickly, especially for a nation with a large trade deficit. “Balance the books” is not really an accurate way to phrase it, but the principle is the same.

  6. sonofrojblake says

    especially for a nation with a large trade deficit

    At least we haven’t done anything recently to make that worse, or anything…

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