London announced on Monday, October 3, to reverse the income tax cut for the richest, unveiled ten days ago and which plunged the financial markets into turmoil.
Finance Minister Kwasi Kwarteng explained the reasons for this decision on Twitter :
“It is clear that the abolition of the 45% tax rate [pour les contribuables dont les revenus excèdent 150 000 livres sterling (171 452 euros) par an] eclipsed our mission to tackle the difficulties in our country. Therefore, I am announcing that we will not prosecute her. We understand, we have listened. This will allow us to focus on implementing the main elements of our growth plan. First, the cap on energy prices. »
Deleting this slice “had become a distraction”Prime Minister Liz Truss wrote on Twitterrecalling its priority of “Building a high-growth economy that funds top-notch public services, raises wages and creates opportunity across the country”.
The pound reacted little to the announcement of the withdrawal of the measure: it was up slightly by 0.3% to 1.1206 dollars around 9:30 a.m. (Paris time).
Liz Truss, who arrived in Downing Street at the beginning of September, and her Chancellor of the Exchequer, Kwasi Kwarteng, announced on September 23 a massive energy support plan for households, accompanied by vast tax cuts.
“Bad Values”
It is on the abolition of this tax rate that many critics in the ranks of the conservatives focused, to the point of raising fears of a rebellion during the vote on the text in Parliament.
Heavyweight of the majority, the ex-minister Michael Gove judged on Sunday on the BBC that“Having tax cuts for the richest as the main fiscal measure is putting forward bad values”.
On the set of the BBC on Monday morning, Mr. Kwarteng made it clear that he ruled out resigning and refused to admit a mistake: this tax cut for the richest “was a huge distraction” which eclipsed “a solid set of measures”he assured.
On the BBC Sunday, Mme Truss had attributed to his sole finance minister the paternity of this measure, arousing astonished reactions.
‘One of Boris Johnson’s flaws was that he could sometimes be too loyal and he understood that’had tweeted the ex-minister of culture, Nadine Dorries, of unwavering loyalty to the former prime minister. “However, there is a balance to be found and throwing your chancellor under a bus on the first day of the congress is not one”she observed on Sunday.
On the second day of the Conservatives’ Congress in Birmingham on Monday, Kwasi Kwarteng was due to defend his “mini budget” and his massive tax cuts.
Trouble in financial markets
Defended by Prime Minister Liz Truss, who nevertheless acknowledged that the government should have “better prepare the ground”, the plan presented on September 23 by Kwasi Kwarteng caused the pound to fall to its all-time low. British government borrowing rates have jumped to their highest since the 2009 crisis, threatening the country’s financial stability.
The Bank of England intervened urgently last week to stabilize rates, which threatened to bankrupt pension funds. The borrowing rates of the State to thirty years continued Monday their decline started since this intervention.
Aimed at dealing with the cost of living crisis, this “mini-budget” provides for the freezing of energy bills and massive tax cuts, with the stated aim of stimulating growth.
“We must stay the course”believes, according to extracts from his speech broadcast on Sunday evening, the Minister of Finance, showing his confidence that the government’s project is ” good “. Invoking energy bills exploding, tax pressure at its highest “for sixty years”Kwasi Kwarteng estimates that a “new approach” was necessary, “based on growth”.
Several hundred people demonstrated in Birmingham on Sunday to the cry of “Tories out! »Where “Say it loud and clear, Tories are not welcome here!” ».
From the podium, the influential rail unionist Mick Lynch described the current situation as ” class struggle “calling on the working class to “change the country” and “change society”.
