The British government has announced it is not proceeding with the abolition of the highest 45-per cent rate of income tax following huge financial turmoil and harsh criticism from within the Conservative Party.
It is clear that the abolition “has become a distraction from our overriding mission to tackle the challenges facing our country,” tweeted Chancellor of the Exchequer Kwasi Kwarteng on Monday.
“We get it, and we have listened.”
“This will allow us to focus on delivering the major parts of our growth package,” including support for energy bills, other tax-cutting plans, and supply-side reforms, he added.
On September 23, Kwarteng unveiled the largest tax cut package since 1972, citing that the top rate tax was higher than countries like Norway, the US and Italy, and the removal was designed to attract top talents.
Currently, Britain’s basic income tax rate is 20 per cent, and it increases to 45 per cent for earnings above 150,000 pounds, Xinhua news agency reported.
The September 23 fiscal statement has thrown financial markets into turmoil as the British pound collapsed to record lows, and government borrowing costs rose sharply. Investors are concerned that the policy will ramp up public borrowing, bring serious fiscal uncertainty and push up already high inflation.
The plan to scrap the top rate of tax also came under fire from the Conservatives on fears that the government may lose touch with voters. Former Transport Secretary Grant Shapps commented on Sunday in a media article that “Tories aren’t meant to govern like this.”
“As a Conservative, I believe passionately in lower taxes, and a vibrant, competitive City of London, but this is not the time to be making big giveaways to those who need them least,” Shapps said.
Maria Caulfield, a Conservative Member of Parliament (MP), tweeted on Sunday that as a working-class Tory, “I have no problem with bankers bonus removal as it is not taxpayers money but I can’t support the 45 per cent tax removal when nurses are struggling to pay their bills.”
Another MP Julian Smith also tweeted on Sunday that the first job of an MP is to act in the interest of their constituents and in the national interest.
“We cannot clap for carers one month & cut tax for millionaires months later,” he said.