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British Prime Minister Liz Truss and Chancellor of the Exchequer Kwasi Kwarteng attend the annual Conservative Party conference on October 2, 2022 in Birmingham, England.

British Prime Minister Liz Truss and Chancellor of the Exchequer Kwasi Kwarteng attend the annual Conservative Party conference on October 2, 2022 in Birmingham, England. (Photo: Leon Neal/Getty Images)

UK's Truss Drops Tax Break for Wealthy, But Austerity Threat Remains Amid 'Tory Class War'

The reversal follows 10 days of financial turmoil and pushback from within the Tory Party as well as from the left, which held massive anti-austerity protests.

Kenny Stancil

Progressives welcomed right-wing British Prime Minister Liz Truss' Monday decision to scrap a widely condemned tax break for wealthy individuals but warned of looming public spending cuts tied to planned corporate giveaways and called for a reversal of the decadeslong neoliberal model that has brought the United Kingdom to the brink of an economic calamity.

"They need to reverse their whole economic, discredited trickle-down strategy."

The proposed elimination of the U.K's top income tax rate of 45% was a small part of the regressive fiscal and deregulatory framework unveiled by Truss, who was picked by the ruling right-wing Tory Party less than a month ago to become the nation's fourth prime minister in the last six years.

Her entire "mini-budget"—an assemblage of £45 billion ($50.7 billion) in unfunded tax cuts announced September 23 by British Chancellor of the Exchequer Kwasi Kwarteng—triggered chaos in financial markets and pushback from across the political spectrum, with the left-wing Enough is Enough campaign organizing massive anti-austerity protests this past weekend.

Even some Tory lawmakers expressed resistance to parts of Truss' package, especially the now jettisoned plan to nix the 45% tax rate—an additional levy paid by Britain's richest 1%, or roughly 600,000 citizens with annual incomes above £150,000 ($168,390). Beneficiaries of the tax break would have gained an estimated £10,000 ($11,275) per year, on average, while the nation's top 0.1% would have gained at least £22,000 ($24,805) per year.

Ben Houchen, the Tory mayor of Tees Valley in northeast England, said Sunday at the party's annual conference in Birmingham that pursuing a move that so nakedly favors the rich amid a cost-of-living crisis is "very naive," while an unnamed Tory MP described it as "deranged," and former Tory cabinet minister Michael Gove called it wrong to implement when "people are suffering."

During an emergency meeting convened by Truss and Kwarteng after several Tory MPs indicated publicly that they would vote against the measure, one senior cabinet minister reportedly said that "the politics of this were just awful and I am amazed the idea has lasted as long as it did."

Less than 24 hours after Truss tried to defend the contentious policy one last time on Sunday, Kwarteng issued a statement Monday declaring that "we get it, and we have listened."

"We are not proceeding with the abolition of the 45% tax rate," said Kwarteng, who called it "a distraction from our overriding mission to tackle the challenges facing our country."

While welcoming "the U-turn," left-wing Labour Party MP Jeremy Corbyn wrote on social media that "if you really wanted to 'listen,' you'd also raise benefits, reverse cuts to [the] corporation tax, and reinstate the cap on bankers' bonuses."

"Twelve years of failed Tory economics have plunged millions into poverty," Corbyn added. "Do you 'get it' now?"

Zarah Sultana, another left-wing Labour Party MP and co-founder of Enough is Enough, told Kwarteng in no uncertain terms that he doesn't "get it" and urged him to "ditch this Tory class war."

Truss' abandoned attempt to axe the U.K.'s top income tax rate would have cost between £2 to £3 billion ($2.3 to $3.4 billion), representing just a portion of the £45 billion ($50.7 billion) in unfunded tax cuts proposed by her administration.

As the Financial Times reported:

Having retreated on the 45% tax rate plan, Kwarteng and Truss could now come under pressure to reverse other proposed unfunded tax cuts that have blown a hole in the public finances.

They include a £13 billion ($14.7 billion) reduction in national insurance, which gives the biggest benefit to better-off voters, and a £17 billion ($19.2 billion) plan to reverse a corporation tax rise—a policy that business leaders have said is not a priority.

Just minutes after announcing the preservation of the 45% tax rate, Kwarteng confirmed that up to £18 billion ($20.3 billion) in annual public service spending remains on the chopping block even though economists have warned that this would have devastating impacts on the nation's public healthcare and education systems.

The level of impending public service cuts is nearly identical to the £18.7 ($21.1 billion) billion corporate tax cut still being pushed by Truss.

The Tories' plan for a simultaneous corporate tax cut and reduction in public services is "a direct trade-off," Enough is Enough tweeted Monday. "Our pain for their profits."

At one of the dozens of Enough is Enough rallies held Saturday, Eddie Dempsey of the National Union of Rail, Maritime, and Transport Workers characterized Truss' austerity budget as a "diabolical disaster."

After having crashed the British pound, he warned, Tories are "going to massively cut expenditure on public services."

"We've got to have a change in direction," said Dempsey. "We need an economy for the people with public ownership, outside of the chaos of the market, so we can have a decent standard of living rather than making this country one big trough for the corporate privateers to stick their noses in and cream off all of our wealth."

That message was echoed by Labour Party MP Rachel Reeves, who said Monday in a statement responding to Truss and Kwarteng's about-face on slashing taxes for Britain's richest households that "they need to reverse their whole economic, discredited trickle-down strategy."

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