Liz Truss faces Cabinet revolt on plan to cut benefits

Liz Truss faces Cabinet revolt on plan to cut benefits to balance the books as Kwasi Kwarteng U-turns AGAIN bringing forward spending blueprint and OBR forecasts to THIS month

  • Liz Truss was under fire from senior Conservative MPs last night after she caved in over tax cuts
  • Critics including Michael Gove seized on climbdown over 45p rate and began targeting other parts of agenda
  • Ex-Home Secretary Priti Patel has fired a warning shot saying Tories will ‘live or die’ by economic credibility
  • Ms Truss also facing battle over consideration to not increase Universal Credit in line with inflation

Liz Truss is facing a Cabinet revolt on plans to cut benefits to balance the books – as Kwasi Kwarteng U-turns again by bringing forward his spending blueprint and OBR forecasts to this month.

The PM is set to defy dozens of Tory MPs by uprating benefits in line with earnings rather than inflation, meaning a real-terms cut. 

She will argue it would be unfair to go beyond what workers are receiving, and the move will save the government around £7billion.  

But speaking to Times Radio, Commons leader Penny Mordaunt said it ‘makes sense’ to increase benefits in line with inflation. She said: ‘We want to make sure that people are looked after and that people can pay their bills.

‘We are not about trying to help people with one hand and take away with another.’

One Cabinet minister told MailOnline: ‘Who has been briefing this stuff? Are we really going to do it? I can’t see how it is possibly going to happen.

‘I am a fiscal hawk but even I don’t think you can keep benefits down. We’ve had enough of a row over the top rate of tax – benefits would be even worse.’

Work and Pensions Secretary Chloe Smith is also thought to have significant doubts over the plans. ‘We know that people are struggling with some of the costs that are rising,’ she told conference yesterday. ‘That’s why protecting the most vulnerable is a vital priority for me and this government.’

The scale of opposition will raise fears that the premier could be forced into another U-turn, further hammering her reputation for decisiveness. 

Mr Kwarteng is expected to declare today that he is bringing forward his promised fiscal statement setting out how he will balance the books – and crucially the OBR watchdog’s verdict on the finances – from November 23. 

The event is now set to take place this month, after markets dived and he endured intense pressure from MPs and economists.

The volte face comes on top of the dramatic shift on the top rate of tax, which is staying despite both Ms Truss and Ms Kwarteng staunchly insisting it would be abolished until yesterday.

In interviews broadcast this morning, but pre-recorded on Sunday, Ms Truss said: ‘We are going to have to make decisions about how we bring down debt as a proportion of GDP in the medium term.

‘I am very committed to supporting the most vulnerable; in fact, in addition to the energy price guarantee we’re also providing an extra £1,200 to the poorest households.

‘So we have to look at these issues in the round, we have to be fiscally responsible.’

She told LBC radio that ‘no decision has been made yet on benefit uprating’, adding that it ‘will be taken in due course’.

But she dropped more heavy hints when pushed on why she commits to increase pensions but not benefits. ‘What I mean is when people are on a fixed income, when they are pensioners, it is quite hard to adjust,’ she said.

‘I think it’s a different situation for people who are in the position to be able to work.’

The warnings came as:

  • Downing Street insisted Mr Kwarteng’s job was safe despite the blow to his credibility;
  • Miss Truss prepared for another clash with critics over plans to squeeze £7billion from the benefits bill by raising payments in line with earnings rather than inflation;
  • Mr Kwarteng offered a further concession to critics by revealing his plans for bringing down government debt will now be fast-tracked;
  • Two opinion polls put Labour 25 and 28 points ahead of the Tories just a month after Miss Truss took charge;
  • A blame game erupted over who first proposed scrapping the 45p tax rate;
  • The pound surged above the level it was trading at before the emergency Budget triggered a slump;
  • Home Secretary Suella Braverman revealed plans to crack down on the number of foreign students allowed into the UK;
  • Former Cabinet minister Nadine Dorries warned the PM might have to hold an election if she departed further from Boris Johnson’s agenda;
  • Business Secretary Jacob Rees-Mogg revealed that decisions on whether to allow fracking would not be put to local referendums. Yesterday’s tax U-turn came despite repeated insistence from both the PM and Chancellor that they were behind the cut. Miss Truss is understood to be frustrated at having to back down, telling colleagues it ‘hurt’ to lose such a ‘totemic’ measure.

Liz Truss has been told to ‘get a grip’ and warned she will ‘live or die’ by the economy as a civil war rages between Tory MPs

The Prime Minister’s critics, including Michael Gove , seized on the climbdown over the 45p rate and immediately started targeting other parts of her agenda

Kwasi Kwarteng formally dropped the plan to scrap the 45p tax rate – paid by workers on more than £150,000 – yesterday morning, less than 24 hours after the PM had insisted she was ‘absolutely committed’ to it

‘If people want to call me Tory scum, I don’t mind’: Jacob Rees-Mogg shrugs off noisy protesters who heckled him as he arrived at Conservative Party Conference 

Jacob Rees-Mogg has shrugged off the protesters who called him ‘Tory scum’ and instead applauded how having the freedom to peacefully protest is ‘marvellous.’

The Business Secretary, who required a police escort as he made his way to the Conservative Party conference, seemed unbothered by the demonstrators who chased and heckled him when he arrived in Birmingham on Sunday.

Mr Rees-Mogg, speaking at the convention Monday night, referred to the hostile reception of shouting protesters as a ‘warm welcome’ and said he ‘didn’t mind’ being insulted by the crowd.

Video footage of his arrival to the International Convention Centre showed Mr Rees-Mogg smiling Sunday night as frustrated Britons called him a w****r and a b*****d.

Fellow Tory MP Michael Fabricant also had vile abuse screamed at him by protesters outside the conference – with some even calling him a ‘Tory c***’.

Mr Rees-Mogg’s appointment by incoming Prime Minister Liz Truss was widely criticised by environmental groups due to his criticism of ‘climate alarmism’ and support for fracking.

The MP addressed the hostile demonstrators during his speech at the convention Monday night.

‘I want to thank you for giving me almost as warm a welcome as I got outside the hall,’ he told the crowd.

‘That’s rather marvellous, having a democracy where you can walk through the streets and people can exercise their rights to peaceful protest.

He added: ‘If people really want to call me Tory scum, I don’t mind.’

Former Home Secretary Priti Patel is firing a warning shot over Ms Truss’ unfunded tax cuts, saying Tories will ‘live or die’ by their economic credibility.

At a fringe event she is due to accuse the PM and Mr Kwarteng of ‘spending today with no thought of tomorrow’.

Ms Patel will also call on Ms Truss to put a ‘ceiling’ on spending in the public sector, adding that there is a cap on ‘the amount we can afford’, according to The Times.

‘We are spending today with no thought of tomorrow, and like the Blob in the old horror film, the more resources are absorbed today, the bigger the problem gets and the more resources it will need to eat up tomorrow,’ she is expected to say.

‘Right now, we have got into a pattern of borrowing huge amounts to fix today’s urgent problems or generate short-term populist headlines. 

‘Each time it seems that there’s a good case, but what does this mean for future generations?

‘I want to see our party regain its credibility by restoring its commitment to sustainable public spending, which is affordable today, tomorrow and for the foreseeable future.’

Mr Kwarteng formally dropped the plan to scrap the 45p tax rate – paid by workers on more than £150,000 – yesterday morning, less than 24 hours after the PM had insisted she was ‘absolutely committed’ to it.

The powerful 1922 Committee chair Sir Graham Brady played a key role in the climbdown, meeting with Ms Truss on Sunday night to warn that she would not get her planned tax cuts through Parliament, despite a 71-seat majority.

 The Chancellor took responsibility for the change of direction, saying ministers had ‘got it wrong’. He added: ‘I’m listening, and I get it, and in a spirit of contrition and humility I have said ‘actually this doesn’t make sense, we won’t go ahead with the abolition of the rate’.’

Ms Truss yesterday said the issue had become ‘a distraction from our mission to get Britain moving’.

In an LBC interview to be broadcast this morning, the PM was asked six times to rule out further U-turns but would only say: ‘I’m determined to carry on with this growth package.’

A former minister who backed her leadership bid said: ‘Her position is such that she really can’t afford to make any more mistakes.

‘She has basically used up all her nine lives in one fell swoop.’

A Cabinet source also voiced disquiet, saying: ‘The trouble with U-turns is that every time you make one you get weaker.

‘Boris had too many U-turns, Theresa had far too many. We are trying to do some very difficult things and we cannot afford many more.’

Mark Littlewood of the Institute of Economic Affairs, which backed the tax cut, acknowledged it had become ‘a political hot potato’ but voiced concern over it being dropped. 

He said: ‘Of course, it will raise the question that the next time Kwasi Kwarteng makes an announcement that Grant Shapps and Michael Gove don’t like, does that announcement stick? 

‘You always worry about that when you see a U-turn. 

I’ve known Liz Truss for many years and I can’t think of another time where she’s changed her mind on anything, anything at all.’

In an LBC interview to be broadcast this morning, the PM was asked six times to rule out further U-turns but would only say: ‘I’m determined to carry on with this growth package’

Tory peer Lord Heseltine today warned Liz Truss ‘things are looking pretty bleak’ ahead of the next general election as he tore into her mini-Budget fiasco.

The former Cabinet minister told the Prime Minister that ‘a very impressive feat of political leadership’ would now be needed to keep the Conservatives in power.

Speaking at a fringe event at the Tory conference – just hours after Ms Truss and Chancellor Kwasi Kwarteng revealed they had U-turned on a controversial bid to abolish the 45p tax rate – Lord Heseltine asked: ‘What was the plan?’

He urged Mr Kwarteng to bring forward promised announcements on how his Treasury proposes to manage the public finances earlier than currently scheduled.

And, although he declined to answer questions on Ms Truss’s future as Tory leader – or Mr Kwarteng’s chances of remaining as Chancellor – the 89-year-old warned the PM of further woes to come.

Lord Heseltine claimed Ms Truss’s legislation aimed at overturning post-Brexit trade arrangements for Northern Ireland would be ‘massacred’ in the House of Lords next week.

Asked how the Government could now push forward its growth agenda, Lord Heseltine told the event in Birmingham: ‘My advice to them is that the first overwhelming essential ingredient is confidence.

‘People have got to believe in the market in which they’re investing.’

He added: ‘Now, if you’re going to invest, you want to know what’s going to happen.

‘And what I can’t understand about the mini-Budget is that they are quite sure about the outcome – there’s going to be faster growth, who’s against that?

‘But what was the plan? They either had a plan – in which case why didn’t they publish it?

‘Or the Office for Budget Responsibility (OBR) had a plan, which we’re told they did, so why didn’t they publish that? Or perhaps there was no plan – and that is serious.’

Lord Heseltine claimed it would be ‘wrong’ for the Chancellor to wait until 23rd November to publish full OBR economic forecasts and deliver a full fiscal statement, as he is planning.

She is also said to be mystified by the decision of many Conservative MPs to publicly oppose a significant tax cut.

She is expected to use her main conference speech in Birmingham tomorrow to insist that her vision of lower taxes and less red tape is the only way to tackle anaemic economic growth.

Meanwhile, Tories will attempt to shift the focus away from the economy today following the humiliation of two U-turns on income tax cuts for the highest earners and the date of a new fiscal plan.

Keynote speeches at the Tory conference in Birmingham by Home Secretary Suella Braverman and Foreign Secretary James Cleverly will aim to set out the Government’s plans on immigration and commitment to support Ukraine.

Ms Braverman will use her conference speech to call for the French to stop more boats crossing the English Channel and set out her intention to bring in new laws to make it easier to deport people who come to the UK illegally. 

The Home Secretary will promise to allow ‘the kind of immigration that grows our economy’ but ‘end abuse of the rules’. 

Mr Cleverly, meanwhile, will declare that Britain has the ‘strategic endurance’ to see Ukraine through to victory over Russian invaders. 

The Foreign Secretary will say that Ukraine has the UK’s unwavering support in its efforts to push back Vladimir Putin’s forces, saying that ‘we are players on the pitch’ and not just ‘commentators’. 

He will also repeat Ms Truss’s vow that the UK will never accept Russian President Vladimir Putin’s annexation of the regions of Donetsk, Luhansk, Kherson, Zaporizhzhia or Crimea.

The Prime Minister has admitted that it had not been an ‘easy’ week but indicated she was sticking with the rest of the tax-cutting package.

She told the Express newspaper: ‘Express readers can rest assured: we will reward your trust. It has not been an easy week, but we have shown that we listen to people’s concerns and we are determined to deliver on our core plan for economic success and security.

‘Our plan for growth is essential to get the British economy moving. Growth is the only way to create jobs, boost wages and fund our vital public services like the NHS.

In his address yesterday, the Chancellor acknowledged it had been a ‘tough’ day but added: ‘We can’t sit idly by. What Britain needs more than ever is economic growth and the Government is wholly committed to economic growth.

‘That is why we will forge a new economic deal for Britain backed by an iron-clad commitment to fiscal discipline.’

A senior Conservative source said that by Sunday evening the PM and Chancellor had decided that the controversy over the 45p tax rate was diverting too much attention from the Budget’s ‘core package’ of help with heating bills, tax cuts and reforms to boost growth.

It followed a rebellion led by former Cabinet ministers Michael Gove and Grant Shapps who warned that they and other Tory MPs were willing to join forces with Labour to defeat the plan in the House of Commons. Mr Gove said the plan to cut taxes for people earning more than £150,000 a year was a ‘display of the wrong values’. Mr Shapps said the ‘politically tin-eared’ move had ‘managed to alienate almost everyone’.

But Paul Johnson, director of the Institute for Fiscal Studies, predicted that more U-turns were likely. He said not scrapping the 45p tax, a policy which would have cost £2billion a year, was only a ’rounding error in the context of public finances’.

With around £43billion of unfunded tax cuts remaining, Mr Johnson warned: ‘The Chancellor still has a lot of work to do if he is to display a credible commitment to fiscal sustainability.

‘Unless he also U-turns on some of his other, much larger tax announcements, he will have no option but to consider cuts to public spending: to social security, investment projects or public services.’

The late-night crisis meeting in Liz’s 22nd floor Hyatt suite where the lady decided she was for turning: ANDREW PIERCE reports on a dramatic day at the Tory party conference

By Andrew Pierce for the Daily Mail 

Sunday night in the Malmaison Birmingham hotel, and Chancellor Kwasi Kwarteng looked uncharacteristically subdued.

Hours earlier, he had shown the Prime Minister a draft of his speech for the following day, in which he intended to vow – in the teeth of furious opposition – to ‘stay the course’ on the Government’s controversial plans to axe the 45p top rate of income tax. 

Yet there were already signs that the policy might be doomed. 

Kwarteng had, in truth, been growing increasingly frustrated. In his mini-Budget just nine days earlier, he had frozen the country’s energy bills at a cost of perhaps £65billion, promised to reverse his predecessor Rishi Sunak’s hated hike to national insurance and even to cut a penny off the basic rate of income tax. Each of these would help ordinary people, not millionaires. 

And yet all the media and Opposition could talk about was the decision to abolish the 45p rate for those earning £150,000 and above. The policy might cost perhaps £2billion – and could, he reasoned, conceivably pay for itself. It was a sideshow – but a political nuclear warhead. 

MP Grant Shapps  called the 45p scheme ‘an unforced error that is harming the Government’s economic credibility’

At dinner at the Malmaison – held in the shadow of Birmingham’s International Convention Centre, the venue for this year’s Tory party conference – Kwarteng was still publicly toeing the party line. He defended the cut with customary ebullience – but this could have been mere bravado. 

I have learnt that, shortly before the dinner, ex-minister Grant Shapps – an old friend of Kwarteng’s and an increasingly noisy critic of the tax-cut – had shown the Chancellor a spreadsheet on his mobile phone. 

Shapps, a self-confessed political geek, had mapped out Tory MPs’ voting intentions – and the numbers looked grim. 

Dozens of backbenchers were resolutely against the policy, planning either to rebel by voting with the Opposition or abstaining altogether. 

Casually, between sips of fizzy water instead of his usual white wine, Kwarteng told his fellow diners that the vote on the mini-Budget would now be held after November 23 – the date of his planned ‘financial statement’ outlining how he intended to pay for all his generous tax-cutting. (Today, there appeared to be another U-turn with news the mini Budget may be brought forward to this month.) 

Shapps himself – who called the scheme ‘an unforced error that is harming the Government’s economic credibility’

A number of senior Tories had spent Sunday lambasting the 45p cut, in what amounted to a gift to Labour. As well as Shapps himself – who called the scheme ‘an unforced error that is harming the Government’s economic credibility’ – serial backstabber Michael Gove had been scathing. 

On Laura Kuenssberg’s political show on BBC One that morning, Gove said the cut had ‘the wrong values’ and added devastatingly that it was ‘not Conservative’. 

The Prime Minister, too, had for days been defending the policy to the hilt – including on Miss Kuenssberg’s show. ‘I stand by the package we announced,’ said Miss Truss.

However, in comments that dismayed her own party, the PM also admitted that the 45p cut had not been agreed in advance by the Cabinet, adding for good measure that it was the ‘Chancellor’s policy’. 

Tory MPs were appalled that Truss appeared to be blaming Kwarteng for the unpopular policy. Ex-Cabinet minister Nadine Dorries accused her of ‘throwing the Chancellor under a bus’. (Friends of Miss Truss insisted to me that ‘she was just answering directly’.) 

On Laura Kuenssberg’s political show on BBC One that morning, Gove (left) said the cut had ‘the wrong values’ and added devastatingly that it was ‘not Conservative’

Only minutes after the Kuenssberg interview ended, an ashen-faced Cabinet minister told me: ‘This measure won’t get through the Commons – too many MPs will vote against it. If we back it, we will be given a terrible time in our constituencies and on social media. It has to go.’ 

Shapps himself – who called the scheme ‘an unforced error that is harming the Government’s economic credibility’, saying: ‘I have been called away on urgent government business.’ He had, I have established, been summoned by the Prime Minister. 

As the day wore on, the chaos persisted – and perhaps Miss Truss began to realise that the lady might be for turning after all. By 9pm, Penny Mordaunt, the Leader of the Commons, was discussing the 45p row at a fringe meeting when she said: ‘It’s nearly Monday, and what have we learned so far in conference? We’ve learned that our policies are great, but our comms [communication] is s***.’ 

At the Malmaison dinner at 9.45pm, the Chancellor’s phone rang. He apologised and announced that he had to go. He had been called to the Prime Minister’s suite on the 22nd floor of the Hyatt hotel for what has been described as a ‘crisis meeting’. 

At 9.45pm, Kwarteng was called to the Prime Minister’s suite on the 22nd floor of the Hyatt hotel for what has been described as a ‘crisis meeting’

The purpose of the meeting was clear. The tax plan, Truss and Kwarteng agreed, had to go: it was overshadowing everything else. 

‘We were losing control of the agenda,’ says a key supporter of the PM. ‘It was not turning into a triumphant first party conference for Liz as leader.’ 

At the heart of the U-turn was a simple political calculation. Yes, the Opposition and the BBC would make hay out of the Government performing a U-turn on a flagship policy. (And, indeed, Radio 4 presenter Nick Robinson could scarcely conceal his glee on the Today programme the following morning as he mercilessly needled the Chancellor during the 8.10am interview.) But leaving the tax cut in place risked undermining the government’s entire agenda. 

A little after 10:30pm, Truss and her team arrived for a reception at The Cube restaurant, with its panoramic views of the city. The event had been arranged by the Conservative Home website – the bible of the Tory faithful – and was co-hosted by officers from the Tory party’s 1922 committee. 

The wine was flowing liberally, but Truss abstained. After she was introduced by 1922 chairman Sir Graham Brady, there were loud cheers when Truss cried: ‘Frankly, we haven’t made enough Conservative arguments for the past few years!’ It was a bravura performance. Yet she knew the U-turn, to be announced imminently, was going to cost her. 

By 11pm, Truss had appeared before the 1922 Committee with a bravura performance. Yet she knew the U-turn, to be announced imminently, was going to cost her

Back in her suite after 11pm, her team scoured the early editions of the next day’s newspapers. Most were leading with gruelling headlines predicting a ‘Tory revolt’ over the tax plans. At least 36 Tory MPs, the number required to defeat the Government, were set to vote against. 

The whips, who are in charge of party discipline, had failed to order backbenchers to toe the line on the tax cut in advance of conference. They were said to be ‘blindsided’ by the scale of the mounting rebellion. 

As the final details of how to frame the surrender were being thrashed out in the PM’s suite, the new party chairman Jake Berry, a ‘Red Waller’ who had warned Tory MPs they faced suspension if they voted against any of the Budget, was hosting a late-night drinks party nearby. 

The chairman seemed on edge. His telephone would not stop ringing. It was clear to everyone present that something major was happening. The Daily Mail heard of the U-turn shortly before 10:30pm. The paper updated its front page to carry a new headline: Are Tories on brink of 45p tax U-turn? Our story highlighted the roles of Gove and Shapps in leading the revolt. 

All told, it was an unholy political mess – and a disastrous day at conference. This morning, the Government moved to damage limitation. By dawn, Wendy Morton, the Chief Whip, was hastily ringing the Cabinet, with one minister telling me they were informed of the U-turn at 7am – just 25 minutes before the Chancellor himself confirmed it on Twitter. 

‘By dawn, Wendy Morton, the Chief Whip, was hastily ringing the Cabinet, with one minister telling me they were informed of the U-turn at 7am – just 25 minutes before the Chancellor himself confirmed it on Twitter’

Five minutes before Mr Kwarteng’s announcement – ‘We get it, and we have listened,’ he wrote online – I bumped into the Chancellor himself in the conference centre. ‘Anything you’d like to share with us, Chancellor?’ I asked him. He smiled grimly, keeping his head down. 

Last night, A senior Tory told me: ‘The PM and Chancellor have used up a lot of goodwill. You have to remember: two-thirds of Tory MPs didn’t vote for her. It’s all very well her insisting there will be ‘no Uturns’ and making tough talk about difficult decisions, but she doesn’t have the mandate.’ 

As for Truss, I’m told she is ‘hurt’ at having had to give up such a totemic tax change. As the thinktank boss Mark Littlewood said: ‘I’ve known Liz Truss for many years, and I can’t think of another time when she’s changed her mind on anything, anything at all.’ 

Rishi Sunak, who Truss beat for the Tory leadership, has opted to stay away from the Tory conference, along with many Tory MPs. He will now be back in Parliament, quietly working on a renewed campaign for the Tory leadership. 

The debacle of the past few days will confirm his view that his frontline political career is far from over. Truss will have to work hard to win round the enemies in her own party.

45p tax rate explained: Q&A as Kwasi Kwarteng scraps plan to remove 45% rate of income tax on those earning above £150,000 from April next year

By Matthew Lodge for MailOnline

Chancellor Kwasi Kwarteng has announced he is scrapping plans to remove the 45% rate of income tax on those earning more than £150,000.  

The controversial plans, which had been revealed as part of his ‘mini-budget’ last week, had sparked outrage among opposition parties and even some Conservative MPs and spooked the markets.

Mortgage rates have risen to their highest level since before the pandemic as a result, the Bank of England was forced to inject more than £60billion into the economy and the pound crashed following last week’s announcement.

The Chancellor insisted the cut would, alongside other measures announced in the fiscal package, promote growth and encourage investment in the UK.

However, after days of mounting pressure from within his own party, Mr Kwarteng performed a U-turn and said the tax cut would no longer go ahead.

Here MailOnline answers your questions about the exactly why the policy provoked such a response.

What was in the Chancellor’s ‘mini-budget’?

Last week Mr Kwarteng announced a ‘mini-budget’ of measures he said would improve growth and lead to people keeping more of their money. 

The Chancellor announced that from April 2023 the Basic rate of income tax would be slashed from 20% to 19%, instead of April 2024 as was previously mooted.

He scrapped the planned rise of corporation tax, meaning it will stay at 19% and no longer go up to 25% next year.

He also announced the reversal of the 1.25% in National Insurance that had come into effect in April this year under previous Chancellor Rishi Sunak. 

There were also plans announced to lift the stamp duty threshold  and a freeze in energy bills that will cost an estimated £60billion over the next six months.

Among the more controversial policies announced was that the limit on bankers’ bonuses would be scrapped and that 120,000 more people on Universal Credit would be asked to look for more work or face benefit sanctions.

But the most controversial was the announcement that from next April the 45p income tax rate on those earning more than £150,000 a year would be axed. 

What is income tax?

Everyone earning more than £12,571 a year has money taken from their salary in the form of income tax, which the Government uses to fund public services.

The UK has a ‘progressive’ income tax system, where the more money you earn, the more you will be taxed.

Based on the amount of money they are receiving, people’s income falls into one of four bands:  Personal Allowance, Basic rate, Higher rate or Additional rate.

All money up to £12,570 comes under the Personal Allowance, meaning none of it is taxed. 

Money between £12,571 and £50,270 falls into the Basic rate – the Government takes 20% of this.

Income between £50,271 and £150,000 falls into the Higher rate, which is taxed as 40%.

The Additional rate applies to all income over £150,000 and is taxed at 45%. 

This does not include other taxes such as National Insurance. 

What is the 45p rate of tax and who pays it?

The 45p rate of tax applies to people earning more than £150,000 a year.

It sees all income over £150,000 taxed at 45% – meaning that for every pound over this amount, the Treasury takes 45p. 

It affects around 500,000 adults – around 1% of the population – and brings in around £6billion to the Treasury every year.

This would have essentially scrapped the Additional tax rate, making all income above £50,270 taxable at a flat rate of 40%.

The Chancellor argued the move would promote growth by allowing people to keep more of their money and encourage investment in the UK.

What does income tax cut mean for me?

For someone earning around £200,000 the tax cut would save them around £3,000.

This lead to accusations that it was a tax cut for the wealthiest at a time when the country is facing a cost of living crisis caused by rampant inflation and soaring energy bills.

The 45p tax cut would not have affected anyone earning less than £150,000 a year, which is around 99% of the population.

The drop in the Basic rate of tax from 20% to 19%, which has not been scrapped, will affect millions of households.

Someone earning £25,000 currently pays £2,486 in income tax – under the new rules this would drop to £2,361.70, a saving of just over £124.

Why have they performed the U-Turn?

After a barrage of criticism from opposition parties and their own MPs, the Prime Minister and Chancellor announced the tax cut would not go ahead this morning.

The furious reaction was augmented by the worried reaction of the markets, as the pound crashed and mortgage and interest rates shot up following the mini-budget.

The stock market plummeted as the traders were spooked by what they saw as unfunded tax cuts at a time when the Government announced it would be borrowing billions to freeze energy prices.

And in Parliament such was the anger at the proposals that there were suggestions that some Tory MPs could vote against the mini-budget when it is put to the House of Commons.

In a statement Mr Kwarteng said the furore over the abolition of the 45p tax rate was ‘a massive distraction’ from the rest of the mini-budget. 

Speaking on morning television today, the Chancellor suggested he had decided to scrap the policy following the reaction and said he was doing so ‘in a spirit of contrition and humility’.

He told LBC Radio that other parts of the growth package had been welcomed but ‘there is this one element, which is the 45p rate, which was, I accept, controversial’ and ‘people have said they don’t like it’.

‘I’m listening, and I get it, and in a spirit of contrition and humility I have said ‘actually this doesn’t make sense, we won’t go ahead with the abolition of the rate’.’ 

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