Government U-turns on scrapping top tax rate after Tory backlash

Several prominent Conservative MPs, including Michael Gove, had publicly opposed the policy
Chancellor Kwasi Kwarteng

By Adam Payne

03 Oct 2022

Chancellor Kwasi Kwarteng has announced that the government will not go ahead with its contentious plan to abolish the 45p tax rate after numerous Conservative MPs signalled their opposition.

In a statement on Monday morning, Kwarteng said that the policy had become a "distraction" from the government's wider economic policy.

A number of Conservative MPs including former Cabinet minister Michael Gove had publicly criticised the policy in recent days, while polling has shown that it is highly unpopular with the general public.

"From supporting British businesses to lowering the tax burden for the lowest paid, our Growth Plan sets out a new approach to build a more prosperous economy," said Kwarteng.

"However, 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.

"As a result, I’m announcing we are not proceeding with the abolition of the 45p tax rate. We get it, and we have listened."

Conservative MPs who had objected to the policy welcomed the U-turn. Former chief whip Julian Smith said Liz Truss and Kwarteng had "listened" to concerns, while ex-Cabinet minister Tobias Ellwood tweeted: "Good call. Thank you for listening."

Grant Shapps, the former transport secretary, said it was a "sensible and pragmatic" step. Last night Shapps warned in a piece for The Times that the policy was "politically tin-eared".

The decision represents a major U-turn for the prime minister and chancellor, who as of yesterday were determined to press ahead with their plans despite restless Conservative MPs and opinion polls putting them far behind Keir Starmer's Labour.

Kwarteng in his speech to Tory party conference today was expected to say "we must stay the course. I am confident our plan is the right one” in a preview circulated on Sunday night.

Penny Mordaunt, the House of Commons leader, last night suggested that the problem had not been the policy, but how it was being sold to the public, telling a reception: "We’ve learned that our policy is great but our comms is shit."

Truss and Kwarteng had argued that the plan would have helped kickstart growth - which is the new government's core economic policy.

However, numerous Tory MPs said it was not fair to give the wealthiest a tax cut in a cost of living crisis and complained that it was so politically toxic that it had distracted from other policies like freezing typical household energy bills.

Rachel Reeves, the shadow chancellor, said: “The prime minister has been forced to abandon her unfunded tax cut for the richest one per cent - but it comes too late for the families who will pay higher mortgages and higher prices for years to come.

“The Tories have destroyed their economic credibility and damaged trust in the British economy.

“There’s no plan to clear up the mess of 12 years of Tory government. They’re making it up as they go along.

“This is not over - it’s not just some distraction.

“The Tories need to reverse their whole economic, discredited trickle down strategy."

Adam Payne is political editor at CSW's sister title PoliticsHome, where a version of this story was first published.

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