Kwasi Kwarteng tells Tory faithful 'what a day' after backtracking on tax plan

UK chancellor dropped plan to scrap top rate of tax after 10 days of market turmoil

Chancellor Kwasi Kwarteng said the UK government has a plan to “get Britain moving” in a speech to Conservatives on Monday aimed at restoring his authority, hours after backtracking on a key proposal to cut taxes for the country's highest earners.

Addressing the audience in Birmingham, he acknowledged it had been a “tough” day but promised there would be no more distractions.

Downing Street said Prime Minister Liz Truss — who was in the audience for the speech — continues to have confidence in Mr Kwarteng, despite him admitting there was “humiliation” in the change of policy. The reversal was widely considered a desperate bid to avert a Tory rebellion over the strategy.

Mr Kwarteng told activists: “What a day. It has been tough but we need to focus on the job in hand.

“We need to move forward, no more distractions, we have a plan and we need to get on and deliver it.”

He added: “I know the plan has caused a little turbulence,” then repeated a phrase he used when first announcing the about face: “I get it. We’ve listened.”

Mr Kwarteng was delivering a speech that could define his political career, trying to win over the Tory faithful after his catastrophic first step as chancellor sent the pound plummeting and rattled the FTSE, handed the opposition Labour party a 33-point poll lead, outraged voters and MPs, and led one senior Tory to suggest Ms Truss should call a general election.

The pound had surged higher in overnight trading into Monday as reports surfaced that the government would drop the decision, and then remained steady throughout the day.

Sterling hit $1.13, matching levels before the mini-budget.

The market turmoil following Mr Kwarteng’s mini-budget had pushed the pound to an record low of $1.03.

The blue-chip FTSE 100 and the FTSE 250 mid-cap indexes rose 0.2 per cent and 0.7 per cent, respectively, on Monday.

Early on Monday, he performed a screeching about face by shelving the plan to abolish the top rate of tax.

Mr Kwarteng acknowledged that the desire to scrap the 45 per cent tax rate on earnings of more than £150,000 ($168,014) in a move to be paid for by borrowing had become “a distraction” and a source of widespread criticism.

Hours later, Mr Kwarteng used his speech to defend the government’s plan to cut taxes in the search for economic growth.

The chancellor is still committed to taking 1p off the basic rate of income tax, reversing April’s increase in national insurance and scrapping the planned increase in corporation tax.

He told the conference: “While we all believe in growth, we as Conservatives also believe that it is an important principle that people should keep more of the money they earn.

“I don’t need to tell you that. That isn’t radical, that isn’t irresponsible. It is a deeply held belief that we all share as Conservatives.”

The about-turn came fewer than 24 hours after Ms Truss said in a television interview that she resolved to stick to the policy, but acknowledged it could have been communicated better. She also said she had not discussed the plan with the rest of her Cabinet.

The government had resisted backing down in the face of criticism from the International Monetary Fund and a £65 billion emergency intervention by the Bank of England to restore order.

However, the prime minister and chancellor had been under growing pressure, including from senior Tory MPs, to back down.

As the Conservative Party conference began in Birmingham on Sunday, some Tories publicly voiced their concerns.

Former Cabinet members Michael Gove and Grant Shapps, who had supported Rishi Sunak in the recent leadership race, expressed their opposition to the cut, calling it “tin-eared” as it benefited the richest at time when lower earners were facing increased bills.

They said Ms Truss would struggle to get the policy through Parliament.

On Monday morning, Mr Kwarteng tweeted: “From supporting British business to lowering the tax burden for the lowest paid, our growth plan sets out a new approach to build a more prosperous economy. However, it is clear that the abolition of the 45p tax rate has become a distraction from our overriding mission to tackle the challenges facing our country.

“As a result, I'm announcing we are not proceeding with the abolition of the 45p tax rate. We get it and we have listened.

“This will allow us to focus on delivering the major parts of our growth package.”

Ms Truss retweeted the chancellor’s message, reiterating that they had heard people’s concerns and were determined to focus on building a high-growth economy.

On Monday, Mr Shapps said the decision to abandon the plan was sensible and inevitable.

He was on air on BBC Breakfast when Mr Kwarteng confirmed the decision and on hearing the statement said: “Those are exactly the right words. I actually saw him last night. I encouraged him to say, ‘look we understand, we get this, sometimes you just get things wrong’.

“This was a mini-budget which was done incredibly quickly … I’m very pleased to see him acknowledging that they understood it was the wrong move and fixing that problem.”

Mr Shapps tweeted that he “strongly welcomed” the scrapping of the plan, calling the decision “sensible and pragmatic”.

“Conservatives want lower tax, but let's show our energy price cap and other policies are on [the]side of consumers rather than borrowing to cut high earner taxes first,” he said in a tweet.

Former Cabinet minister Nadine Dorries went as far as to suggest a general election should be called amid Tory party infighting.

Ms Dorries, a staunch ally of Boris Johnson, said there was “widespread dismay” at Ms Truss for ditching key parts of her predecessor’s administration’s agenda, saying three years of work “has effectively been put on hold”.

“No one asked for this,” she tweeted. “C4 [Channel 4] sale, online safety, BBC licence fee review, all signed off by Cabinet all ready to go, all stopped.

“If Liz wants a whole new mandate, she must take to the country.”

Conservative Party conference — in pictures

British Prime Minister Liz Truss speaks at the ruling Conservative Party's annual conference in Birmingham. Reuters

Attendees take their seats before the keynote speech by Ms Truss. Bloomberg

Chancellor of the Duchy of Lancaster Nadhim Zahawi speaks. PA

Prime Minister Truss and her husband Hugh O'Leary arrive for day four of the Conservative Party conference. Getty Images

A delegate wears a red 'Make Britain Great Again' cap. Getty Images

A member of the audience wears socks with Union Jack colours. Reuters

Liz Truss and Chancellor of the Exchequer Kwasi Kwarteng visit the construction site of a medical innovation campus during day three of the Conservative Party conference in Birmingham. Getty Images

Foreign Secretary James Cleverly arrives at the conference. Reuters

Former home secretary Priti Patel speaks in Birmingham. Getty Images

A delegate is pictured with a bag displaying pictures of former Conservative prime ministers Benjamin Disraeli, Winston Churchill, Boris Johnson and Margaret Thatcher. AFP

Mr Kwarteng delivers a speech on day two of the annual Conservative Party conference in Birmingham. Getty Images

Liz Truss, Chancellor of the Duchy of Lancaster Nadhim Zahawi and Secretary of State for Health and Social Care Therese Coffey listen to Mr Kwarteng speak. Reuters

Ms Truss arrives for the Conservative Party Conference. EPA

Leaflets with Ms Truss on the cover are seen on the second day of the conference. Getty Images

A person attending the conference carries a bag from the Taxpayers' Alliance. EPA

Refugees present Tory delegates with 'one-way tickets' to Rwanda during a protest outside the Conservative Party annual conference. PA

Business, Energy and Industrial Strategy Secretary Jacob Rees-Mogg laughs as he arrives. EPA

Ms Truss and Mr Kwarteng chat at the opening session of Conservative Party conference in Birmingham. EPA

A protester demonstrates outside the annual autumn conference. Bloomberg

Mr Kwarteng gives a TV interview. Reuters

Protesters march with placards at a demonstration in Birmingham against the Conservative government as the party's conference started in the city. Bloomberg

The prime minister and members of her Cabinet sing the national anthem at the opening session. EPA

Penny Mordaunt, Leader of the House of Commons, pays tribute to Queen Elizabeth II. PA

Protesters and police clash in Birmingham city centre. Getty Images

Former British prime minister Boris Johnson is reflected in Mr Kwarteng's glasses. Reuters

A protester holds a placard condemning the chancellor. Bloomberg

Ms Truss arrives at the conference. Bloomberg

Delegates take a break outside the venue on the opening day. AFP