British Prime Minister Liz Truss on Monday reversed plans to abolish the 45% tax rate for the country's highest earners. File Photo by Hugo Philpott/UPI | License Photo
Oct. 3 (UPI) -- Amid widespread criticism and a sinking economy, the British government on Monday announced it would not follow through with its plan to abolish the 45% tax rate for the country's highest earners.
Truss, who became prime minister less than a month ago, tweeted Monday that they were scrapping the plan to axe the 45% tax rate for those earning more than $168,000 annually as it has "become a distraction from our mission to get Britain moving."
"Our focus now is on building a high-growth economy that funds world-class public services, boosts wages and creates opportunities across the country," she said.
Since it was unveiled as part of a larger growth agenda by Chancellor of the Exchequer Kwasi Kwarteng on Sept. 23, Truss has been defending the plan from criticism as the unfunded tax cuts, the steepest since the 1970s, has led to a selloff of British government bonds and a dramatic drop in the value of the pound against the U.S. dollar.
While politicians at home have warned Truss of the political risks that following through with this tax cut will have, the International Monetary Fund had asked her to reconsider over fears it will worsen inequality.
"We get it, and we have listened," Kwarteng said Monday.
In an interview later Monday with the BBC, Kwarteng defended the reversal, saying this one aspect was "drowning out a strong package" that included other tax cuts as well as support for energy bills.
"We've listened to the people," he said. "And, yeah, there is humility and contrition in that. And I'm happy to own it."
Rachel Reeves, the shadow chancellor of the Exchequer and a Labor member of Parliament, said Truss' reversal comes too late to aid families who will now have to pay higher mortgages and prices because of it.
She has called on the Conservative-led government to scrap its entire economic strategy.
"Their kamikaze budget needs reversing now," she said in a statement.
The British pound, which had dropped to a historic low of $1.03 against the U.S. dollar last week, climbed to $1.12 Monday on news that the government had dropped its plan to abolish the highest tax rate.