Tory revolt forces Liz Truss to ditch plans to scrap 45p tax rate

2022-10-03

Chancellor will REVERSE 45p tax cut: Tory revolt forces Truss and Kwarteng to ditch plans to abolish 45p rate of income tax for higher earners

The Government has U-turned on the 45p tax rate row after following a huge Tory revolt over the move
Prime Minister Liz Truss and Chancellor Kwasi Kwarteng backtracked amid threat of losing Commons vote
A U-turn on the policy viewed as the price of shoring up Tory support for the rest of the mini-Budget measures

Liz Truss and Kwasi Kwarteng will today drop their proposal to scrap the 45p tax rate.

The plans to reduce the amount people earning £150,000-a-year pay to HMRC has been branded a ‘massive distraction’ and has seen the Tories fall further behind Labour in the polls.

Yesterday Ms Truss stood by the policy – but blamed the decision on her Chancellor Mr Kwarteng. Today No 10 sources briefed that the Government would U-turn on the 45p tax rate row after two former ministers led a huge Tory revolt over the move.

The furore over the mini-Budget decision to abolish the top tax rate is threatening to overshadow the Conservative Party conference. Some party sources claimed Ms Truss ‘could be gone by Christmas’ unless she backed down to ‘livid’ Tory MPs.

A U-turn on the policy is being viewed as the price of shoring up Tory support for the rest of the mini-Budget measures.

Liz Truss and Kwasi Kwarteng will today drop their proposal to scrap the 45p tax rate

A senior Whitehall insider told the Daily Mail: ‘The 45p row is becoming a massive distraction which is drowning out all the other vital and urgent things in the Budget.’

MPs will not be asked to vote on the controversial measure until after Chancellor Kwarteng reveals the government’s fiscal plan on November 23, which should outline how the decision will be funded, government sources told The Telegraph.

Michael Gove had led calls for the Prime Minister and her Chancellor to ditch the plan to abolish the 45p tax rate on the first day of the conference in Birmingham.

Former transport secretary Grant Shapps echoed Mr Gove’s comments, saying last night the move to abolish the rate was ‘tin-eared’.

The row came as:

Miss Truss admitted errors were made in the handling of the mini-Budget, saying ministers could have ‘laid the ground’ better, but insisted she will not change course.
Former minister Nadine Dorries accused Miss Truss of throwing Mr Kwarteng ‘under a bus’ by claiming he alone was responsible for the decision to scrap the 45p income tax rate.
The Prime Minister said she would ensure the state pension rises in line with inflation next year – but refused to make the same commitment for benefits.
Tory chairman Jake Berry warned that Conservative MPs voting against any aspect of the Budget would be suspended from the party.
Two senior Conservatives needed police escorts as they were heckled by protesters shouting ‘Tories out’ outside the conference yesterday.

Michael Gove (pictured) has used a series of appearances at the Birmingham conference to stoke anger towards Liz Truss and Kwasi Kwarteng’s plan to abolish the 45p top tax rate (file image)

Kwasi Kwarteng (left) is today expected to use his first conference speech as Chancellor to pledge to ‘stay the course’ with his plans, saying that years of economic policy consensus have left Britain in a state of ‘slow, managed decline’ that must be reversed. However, last night speculation was mounting that he and Prime Minister Liz Truss (right) could perform a U-turn and ditch the 45p policy

Kwasi Kwarteng will tell Tories his controversial plan is the only way to stop UK’s ‘managed decline’

The Chancellor will today insist his plan for economic growth is the right one.

In a crucial speech, Kwasi Kwarteng will tell delegates at the Conservative Party conference in Birmingham: ‘We must stay the course.’

Amid alarm at the scale of his tax cuts, he will say that a new approach was desperately needed to stop Britain falling out of the ranks of the top developed nations.

And he will promise an ‘iron-clad commitment to fiscal discipline’ after markets took fright at the lack of an immediate plan to fund his plans and absence of independent scrutiny of his mini-Budget.

Mr Kwarteng is expected to say: ‘We must face up to the facts that for too long our economy has not grown enough. The path ahead of us was one of slow, managed decline. And I refuse to accept that it is somehow Britain’s destiny to fall into middle income status, or that the tax burden reaching a 70-year high is somehow inevitable.’

Pledging that his approach will deliver higher wages, more jobs and revenue to fund public services, he will declare: ‘We must stay the course. I am confident our plan is the right one.’

Mr Kwarteng will tell the party faithful that the combination of skyrocketing energy bills, a 70-year high tax burden and ‘painfully slow’ building projects would cost livelihoods and communities. Instead, he will claim that his ‘new economic deal for Britain’, targeting 2.5 per cent GDP growth a year, will lead to a stronger NHS and better schools.

And he will insist his goal is still possible in the face of ‘extreme volatility in global markets’ and major currencies ‘wrestling an incredibly strong US dollar’ – countering criticism that Britain alone is suffering economic turmoil.

A defiant Mr Kwarteng is today expected to use his first conference speech as Chancellor to pledge to ‘stay the course’ with his plans, saying that years of economic policy consensus have left Britain in a state of ‘slow, managed decline’ that must be reversed.

However, last night speculation was already mounting that he and Miss Truss could perform a U-turn and ditch the 45p policy – the price of shoring up Tory support for the rest of the mini-Budget measures is drowning out all the other vital and urgent things in the Budget.’

The U-turn was confirmed by sources this morning.

As many as 70 Tory MPs were considering voting against the policy and are now pushing Ms Truss to delay scrapping the 45p rate for a year, one insider alleged.

MPs had been expected to vote on the decision as early as next week, but postponement has now prompted speculation that the policy could also be pushed back.

The delay also affords Ms Truss more time to try and sell the policy to her MPs and voters. Similarly, it gives rebels additional time to organise themselves.

The rebels have reportedly discussed voting with the Labour Party if Sir Keir Starmer tables an emergency debate to reverse the tax cut or an opposition day motion.

In a pre-emptive strike yesterday, Mr Gove said it was ‘not Conservative’ to use ‘borrowed money’ to fund scrapping the 45p income tax rate. And Mr Shapps echoed his comments, saying the Government should not be handing ‘big giveaways to those who need them least’.

Mr Gove’s intervention has sparked disputed claims that he is acting as an outrider for Rishi Sunak, who he backed against Miss Truss in the Tory leadership race.

A string of other Sunak-supporting MPs spoke out against the Government’s plan to axe the top tax rate after Mr Gove described it as ‘a display of the wrong values’.

Writing in The Times today, Mr Shapps, who also backed Mr Sunak, said: ‘This politically tin-eared cut, not even a huge revenue raiser and hardly a priority on the prime ministerial to-do list, has managed to alienate almost everyone, from a large section of the Tory parliamentary party taken by surprise to the City traders who will actually benefit.’

Last night senior Tories warned that Mr Gove’s actions could further damage the party, which is already trailing heavily behind Labour in the polls.

One No 10 insider described the former minister as ‘deluded’.

Another ally said his decision to tour the conference criticising the Government’s programme was ‘massively unhelpful, but sadly not a surprise’.

Former Tory leader Sir Iain Duncan Smith accused Mr Gove of serial disloyalty, referring to his role in ousting Boris Johnson from No 10.

He said: ‘It’s Sunday, the first day of conference for a new Tory leader and Michael Gove is out there stabbing her in the back. Isn’t getting rid of one prime minister enough for him?

‘Someone needs to confiscate his knives – he is a danger to people and to the party. He said he was leaving politics but it proved too good to be true and he’s back again trying to destabilise a new PM.’

Mr Kwarteng’s surprise decision to announce the end of the 45p tax rate in last month’s emergency mini-Budget was a focal point for Tory critics of Miss Truss last night.

The Prime Minister had pointed out yesterday that the controversial tax cut was ‘part of an overall package of making our tax system simpler and lower’. But she stressed that it was a relatively minor Budget measure compared with the Energy Price Guarantee, which could end up costing £150billion.

Miss Truss admitted errors were made in the handling of the mini-Budget, saying ministers could have ‘laid the ground’ better, but insisted she will not change course

In an appearance on the BBC’s Sunday With Laura Kuenssberg show, Mr Gove said it was one of a number of ‘mistakes’ made by the PM and Mr Kwarteng which had left him ‘profoundly’ concerned.

Asked if he would vote for the mini-Budget if it remains unchanged, he suggested he would not, saying: ‘I don’t believe it’s right.’

He continued his criticism during a series of other appearances on the conference fringe, saying: ‘It’s going to be very, very, very difficult to argue it’s right to reduce welfare when we’re also reducing tax for the wealthiest.’

A Tory source expressed frustration with Mr Gove’s bid to encourage opposition to the tax cut, saying: ‘When people have seen the full package, including the supply side reforms to boost growth and the commitment to control debt, we are confident they will feel differently about this – provided they have not already had their heads turned.’

By last night around a dozen Conservative MPs had indicated they would vote against the 45p tax cut. Andrew Bowie, a former parliamentary aide to Theresa May, said Mr Gove was ‘right’ to describe the unfunded 45p tax cut as ‘un-Conservative’.

A friend of Mr Gove denied he was attempting to undermine the Government, and insisted he was not acting on behalf of Mr Sunak or anyone else.

‘He is just doing what he thinks is right. I think he is speaking for an awful lot of MPs, but he is not coordinating with anybody,’ the source said.

But in a pre-emptive strike yesterday, Mr Gove said it was ‘not Conservative’ to use ‘borrowed money’ to fund scrapping the 45p income tax rate. And former transport secretary Grant Shapps last night echoed his comments, saying the Government should not be handing ‘big giveaways to those who need them least’. Mr Gove’s intervention has sparked disputed claims that he is acting as an outrider for Rishi Sunak, who he backed against Miss Truss in the Tory leadership race.

A string of other Sunak-supporting MPs spoke out against the Government’s plan to axe the top tax rate after Mr Gove described it as ‘a display of the wrong values’.

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