UK Prime Minister Liz Truss on Monday underlined her confidence in Chancellor of the Exchequer Kwasi Kwarteng after the government backtracked on its plan to scrap the 45 percent marginal rate that taxed income above 150,000 pounds (171,596 euros) a year.
“We understand and we have listened,” said both Truss and Kwarteng, who have opted to park an initiative that they felt was providing a “distraction” to the overall work of the government. Both have pledged to go ahead with most of the tax cut plan.
Indeed, a Downing Street spokesman has indicated that it will be the minister who will present the UK’s medium- and long-term fiscal plan on November 23, implying that no cabinet changes are planned. When asked whether Truss still trusts Kwarteng, he answered with an emphatic “yes”, according to the BBC.
The government also hopes that the tax plan can make it through Parliament, where changes to a tax affecting 1.7 percent of taxpayers had become a source of internal dissension within the Conservative Party and also a political weapon in the service of the opposition.
The head of Finance within the Labor Party, Rachel Reeves, has assured that it was “obvious” that the first tax bill was not going to receive in any case the approval of the MPs, so she believes that the Truss Government has acted forced by the circumstances. “The damage has already been done,” he said.
The removal of the 45% marginal rate of income tax, which affects only those Britons earning more than £150,000 a year, was to result in a loss of revenue to the public purse of £2,065 million (€2,362 million) over five years.