Chancellor U-turns on scrapping 45p tax rate
The Chancellor, Kwasi Kwarteng, has announced a U-turn over the abolition of the top rate of income tax for the highest earners. We asked small business owners for their thoughts on this.
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25 responses from the Newspage communityCopy all
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It's a welcome reversal, but this U-turn shows the Government really haven't got a clue what they are doing. They're making it up as they go along, hoping for the best or adopting Labour policies. Only yesterday morning Liz Truss was adamant that she would be sticking with the unjustified tax cuts for the wealthiest 1%. I hope this gives much needed confidence to the markets and the Bank of England does not need to intervene with an emergency interest rate hike, which would have had a negative impact on millions of borrowers.
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The scrapping of the 45% rate was always going to attract criticism while people are struggling to cope with the higher cost of living. Unfortunately, a U-turn will add to the appearance of indecisiveness, which fuels uncertainty in the markets. There is still a perception that energy bills are capped at £2,500 per household and this is incorrect. The price per unit is capped but not the number of units that can be used. Clear messages are needed.
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Politicians attract ridicule for changing their mind on important matters. In this case, I can understand why. The Government clearly believes in this policy but has succumbed to political pressures. Reversing the abolition of the 45% rate now only adds to the chaos and uncertainty. Financial and currency markets reacted as they did to the mini-Budget because it was unsubstantiated. They lost confidence. A flip-flop doesn't restore confidence. In fact, it does the polar opposite.
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Above all, this U-turn signals to the world that we are governed by people with no spine. The irony is that the markets were not spooked by the income tax fiddling. They were spooked by high inflation and the enormous energy bill supports, and on that front nothing has changed. It's a symbolic move but one that will likely do nothing to counteract the pressure on Sterling.
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We need a government that makes decisions and sticks to them. Instead we appear to have a headless chicken. A U-turn will simply fuel the already exceptional uncertainty in the economy, as what else are the Government prepared to U-turn on? For a government to U-turn so early in its tenure is nothing short of a calamity. No wonder there's so much volatility in the currency markets.
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I’m surprised that the Chancellor has listened considering he appears to be so profoundly deaf. Although I am no fan, I must credit him with performing a U-turn on clearly the most unpopular policy in the mini-Budget. There are lots of other unfunded tax pledges in this fiscal event, apart from the energy support, so we will see what markets thinks of this.
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This is welcome news and almost certainly the right decision. However, the OBR's response to the mini-Budget needs to happen as soon as possible to potentially undo some of the damage that was done last week. Even if the markets respond well, I fear mortgage lenders may take some time to reflect positive news in their pricing. We may see further U-turns at this rate.
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The Chancellor says he has listened and decided to U-turn. They still don’t get it. They should never have even attempted this policy in the manner they did. This is, at its heart, not a policy issue, it’s a credibility issue. Either they did know what would happen to financial markets but didn’t care until it became too politically toxic, or they didn’t know what would happen, proving they’re economically illiterate. Either way, their reputation is in tatters, market confidence has packed its bags and got on a plane and mortgages are shot to bits. If I caused half as much carnage in any business in less than a week, I’d be given my marching orders, and rightly so.
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I'm relieved, but this does not take away the damage done and the new debts we accrued as a result. This was a rollercoaster that businesses and consumers did not need to ride after the many challenges we have all faced after the past three years.
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" It is welcome news this morning that the Chancellor is is doing a U-turn on the abolition of tax for the top rate of income for the highest earners. It does however add a further nail to the coffin of the Conservative party. The people of the UK are struggling financially with the cost of living crisis and we need strong, sensible and decisive leadership. Instead the Government continues to deliver uncertainty, scandal, fear and dismay to the people of the UK. Mixed messages and U-turns have become a tory party speciality.
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The additional rate tax cut was politically toxic so it seems a U-turn was inevitable. The intent to rein in the fiscal largesse will be welcomed by markets. Sterling is stronger but bonds remain weak. However, there is a substantial ongoing deficit to fund. And if, as rumoured over the weekend, this is likely to be financed by cuts in spending and benefits another showdown looms. Confidence is still lacking in this government and there is a “cliff edge“ in a couple of weeks when the Bank of England's emergency bond buying programme comes to an end.
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In these times of uncertainty, nothing screams that you don’t know what you're doing than changing your mind a week later. We need stable, resolute leadership, and while we can all admit we’ve made a mistake, they’re running a country in a challenging time. Let’s be brutally honest, they had some time to properly bring a plan together due to the monarchy transition, and still managed to declare something that even their own party disagreed with. If they can’t lead their own party, how can we expect them to lead a whole country through these turbulent times? Doing what you say you will do is the first rule of leadership, but it’s like they don’t even know what they are saying, never mind what they are doing.
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The argument for simplifying the tax system is a strong one. But prioritising tax cuts for the highest earners at a time when many other workers are struggling to put food on the table is incredibly unfair. The lack of political nous from Kwarteng and Truss is astonishing.
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As someone who was asking for a U-turn , I can hardly lambast the guy for doing that, however, it absolutely supports my previous comments and opinion that this mini-budget was ill-conceived at best and ignorant at worst. Above all, what none of us like, least of all markets, is uncertainty. To the world, it now appears that in the UK we have a government shooting from the hip and using a band aid for a bullet wound.
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Whilst this is welcome as I think most agreed it was a vastly unpopular policy, I feel that the balance still needs to be addressed with the lower earners. Surely they should be looking to take the income that the treasury will now recover and use it to increase the nil rate tax band which is the easiest and quickest way to get relief to the people who need it most.
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Unfortunately, this just adds to the uncertainty and trust in the current Government. The knock-on effect for the protection industry will unfortunately be more cancelled life insurance policies and more families financially exposed at a time when they are going to need all the help they can get.
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The Lady is not for turning but the fall guy is on a roundabout. The Chancellor has decided that scrapping the 45% tax band doesn't after all promote growth and should be ditched to appease the baying mob. The messaging was clear by Liz Truss over the weekend that Kwasi was going under the bus, as she made clear that it was all his idea. To his credit, he stuck with the agreed line on Monday morning. The simple conclusion must be that cutting the additional rate would not have had a significant impact on stimulating the economy. Therefore, you have to ask, why do it in the first place? Monday's U-turn also seems to reinforce the suspicion that heavy spending cuts are to come, and benefits to some of the poorest and most in need are fully in the spotlight for these. It turns out even a Dickensian chancellor was not immune to optics.
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It was a bad idea from the start, but nothing spooks the markets like uncertainty. Policy made seemingly on the hoof isn't a good look. I suspect this decision was made to prevent the embarrassment of senior Tories voting it down rather than benevolence.
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It was only a matter of time before Kwasi Kwarteng retracted some of the outrageous policies announced at the mini-Budget. He needs to reinject confidence in the Pound and ease the uncertainty in the financial markets. The biggest question here is, is he the right Chancellor to take us forward, and will Liz Truss continue to defend him?
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It is hard to be positive about a U-turn on a decision that should have never been made. You can't make this up. We've seemingly got a Government with no idea what it's doing.
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The pressure cooker got too hot, and it was nice to see the Chancellor's friend, Liz Truss, throwing him under the bus by saying it was all his idea. That highlights more issues within Government than we already thought. The next question is, which other policies now go the place where they belong, namely the scrapheap? Maybe the OBR gave a hint last week in that meeting that if you scrap X, Y and Z then you might just get away with it.
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This is simply Kwarteng trying to save his own political skin. And it'll do nothing but sew more uncertainty in the markets. This guy and his boss are complete buffoons and need to stand down.
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A sensible decision, and one that was well needed. However, I fear it is too late to save much of the damage done. What's the next step up from omnishambles?
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All this signals is that, yet again, if the left-wing media can get enough people screaming at once, it can force this Tory Government into a U-turn. Remember it was the constant U-turns that symbolised Boris Johnson's premiership as a rudderless one. It's quite a feat that within two weeks, Truss and Kwarteng have forced themselves into a corner and will be unable to implement any potentially difficult policies in the future.
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Making a bad decision and then doing a U-turn is something the Conservatives have been doing for years, so I doubt many people were surprised by Monday's volte face. It would be refreshing to have a government that made decisions based on improving the lives of every citizen, not just a small minority. Now that would be a surprise.