UK's Truss forced into humiliating tax U-turn

British Prime Minister Liz Truss was forced on Monday into a humiliating U-turn, reversing plans to cut the highest rate of income tax that helped to spark a rebellion in her party and turmoil in financial markets.

Truss, and her finance minister Kwasi Kwarteng, announced a new "growth plan" on Sept. 23 that would cut taxes and regulation, funded by vast government borrowing to snap the economy out of years of stagnant growth.

But the plan triggered a crisis of investor confidence in the government, hammering the value of the pound and government bond prices and jolting global markets to such an extent that the Bank of England had to intervene with a 65 billion pound ($73 billion) programme to shore up the markets.

While the removal of the top rate of tax only made up around 2 billion out of a 45 billion pound tax-cutting plan, it was the most eye-catching element of a fiscal package that was to be funded by government borrowing, with Kwarteng not explaining how it would be paid for in the long-term.

(Source Reuters)