Chancellor U-turns on scrapping 45p tax rate

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.

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.

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.

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.

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.

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.

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?

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.

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.

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.

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.