world

British PM Truss forced into humiliating tax U-turn

50 Comments
By Elizabeth Piper and Kylie MacLellan

The requested article has expired, and is no longer available. Any related articles, and user comments are shown below.

© Thomson Reuters 2022.

©2022 GPlusMedia Inc.


50 Comments
Login to comment

I think racism does play a role in how the markets viewed the economic strategy. It's still common for casual racism to be present in middle class circles, and I imagine that a new experiment put forward by a black person would be less trusted than a experiment by a white person or indian person. Furthermore it is also somewhat clear that the reasons for Kwasi getting the position of Chancellor aren't based on merit and so there is a crisis of confidence.

The only way to prevent further damage is for Kwasi to resign. But I think there is no real alternative for Truss because someone needs to take the blame for the US Fed-led recession and gas war this winter that no prime minster will have any control over.

-29 ( +4 / -33 )

in other words Albion is doomed.

-5 ( +6 / -11 )

Poor start for the prime minister. With the mandate to clear the sot and smoke from the post-Johnson, Tory chimney, Liz Truss employed a tactic that very nearly saw her being put on the woodpile. She should seek stability before bringing in or allowing her closest allies to bring in radical mandates.

-2 ( +4 / -6 )

If she took an online University course in economics, she might keep her job.

-2 ( +8 / -10 )

Surely in a nation of 60 million plus they could have come up with someone better than this hopeless woman and the kwasi buffoon?

Sad to see how far the UK is falling.

2 ( +12 / -10 )

Unlike last month, few will lament the passing of this Liz.

11 ( +14 / -3 )

I think racism does play a role in how the markets viewed the economic strategy. It's still common for casual racism to be present in middle class circles, and I imagine that a new experiment put forward by a black person would be less trusted than a experiment by a white person or indian person.

This policy was decried during the Conservative Party leadership campaign by Rishi Sunak, the previous chancellor who is of course of Indian origin. Sunak said unfunded tax cuts would lead to huge rises in interest rates.

Liz Truss was directly asked and said she was "absolutely committed" to this tax cut on the BBC less than 24 hours ago. I wonder what else she is absolutely committed to.

11 ( +14 / -3 )

I wonder what else she is absolutely committed to.

The furtherance of her own career. That's all. 28 years ago she was an anti-monarchist who believed in fairness and common sense....

https://www.youtube.com/watch?v=2qfg1AQnWIM

Now she presides over what the Financial Times declared last week was the "world's most right wing government."

https://www.thelondoneconomic.com/politics/breaking-tories-now-most-right-wing-government-data-336113/

8 ( +13 / -5 )

kohakuebisuToday  05:08 pm JST

I wonder what else she is absolutely committed to.

her ego perhaps? oh! and her portfolio of course....

10 ( +12 / -2 )

@Alfie Noakes

Now she presides over what the Financial Times declared last week was the "world's most right wing government."

The Financial Times is now nothing but a leftist propaganda rag like the Guardian. Anything to the right of these people is viewed as 'far right' or 'fascist' or some other silly nonsense.

-8 ( +7 / -15 )

she should have done more to "lay the ground" for the policy.

I think that's the Tory version of the Japanese 説明が足りなかった/we didn't explain it clearly enough.

In either case, it's the public's fault for not understanding the policy and how brilliant the politicians are, not the politicians' fault for having lousy policies.

Do you need an arrogance implant to be a politician?

12 ( +15 / -3 )

Don't know much about GB, but this sounds like Reaganomics - a "trickle-down" economy. It didn't result well in the US.

9 ( +12 / -3 )

Not enough. The unfunded tax reductions are more of a problem, economically.

Tory policies are now going to lead to substantial interest rate rises which will push up mortgage rates. Add that to Brexit and the Tories have shafted the people they rely on for support - homeowners and businesses.

Truss is incompetent, out of her depth and completely out of touch with the political landscape she is flailing around in.

The Tory conference is going to be fun given the stats on Labour support.

This is a zombie regime. Who'd have thought, after Boris, they could actually get worse!

8 ( +11 / -3 )

The Financial Times is now nothing but a leftist propaganda rag like the Guardian. Anything to the right of these people is viewed as 'far right' or 'fascist' or some other silly nonsense.

Funny. The Guardian is a monarchist, sh*t-lib mouthpiece for the British security services that spent years fake-smearing Jeremy Corbyn as an anti-Semite and abandoned Julian Assange to his fate.

The Financial Times is owned by Nikkei, that well-known hard left Japanese media empire....

8 ( +15 / -7 )

Unlike Thatcher, Truss is absolutely "a lady for turning" and her U-turn was all too predictable, but let's hope this chaos won't bring another helping of that ""Eton Mess": Bozo's cunning plan to inflict his "Cincinnatus" shtick on the befuddled right-wing electorate.

1 ( +5 / -4 )

I remember somewhere in JT I commented she would end up in vicious circle. Journey just began

0 ( +4 / -4 )

Very smart to admit when you are wrong.

-1 ( +4 / -5 )

British Chancellor of the Exchequer Kwasi Kwarteng does a major flip flop. How long will he hang on?

2 ( +5 / -3 )

One the one hand, the Bank of England is buying government bonds. i.e. printing money circa 2022. Thereby throwing gas on the inflation fire.

On the other they are raising interest rates. i.e. trying to extinguish the inflation fire.

I know capitalist economy has reached the point where it's hopeless but doing nothing, like Japan, is better than what they are doing in the UK.

-3 ( +2 / -5 )

Hmm... so they're ditching one of their new policies because of a Public backlash.

That's interesting.... so if we Politicians actually start listening to Real people, what chaos will come forth from that ?

Sounds like, this new Government is simply making things up as they go along - the first draft was pretty much along the lines of how Tories believe in themselves - rip off the rest of us for their own personal benefit. Now, all we need to do collectively, is to complain about each individual policy to the point, that what actually comes forth is what we, think would work for us, and not simply for them.

4 ( +6 / -2 )

For the US based readers, you could perhaps watch the UK Housing Market, particularly January to March, especially if the Currency remains weak, there may be a lot of housing going onto the Market then, as people - mostly the "Buy-to-Let" Landlords, find themselves in Negative territory. Negative Equity will return to the UK, be prepared. Housing in the UK has been overpriced anyway for quite a while - the Government scheme for "Buy-to-Let" basically created a crisis in the making, which we are now seeing unfold, so if you are a "Vulture", await the pickings.

3 ( +4 / -1 )

The UK price for electricity is ¥54/kWh. Japan ¥22/kWh.

Oct 2020 ¥24/kWh----------------------Oct 2022 ¥54/kWh

Gas

Oct 2020 ¥4.2/kWh-----------------------Oct 2022 ¥16/kWh

Some of my family are taking cold baths.

1 ( +3 / -2 )

Crucially a full OBR, UK’s independent watchdog for public finances, must publish a full detailed assessment of the financial impact of Kwasi Kwarteng budget.

Truss and Kwarteng’s made a deliberate and conscious decision not to fully engage with the OBR into the fiscal, monetary and economic consequences of the mini budget, £45bn tax cuts plus the £60bn energy support package.

0 ( +2 / -2 )

This was a very weak move.

Truss is probably right in that the groundwork may not have been laid, but in combination with loads of borrowing from nowhere to pay for energy subsidies, the optics were problematic.

But they should have had the guts to stick to their plan. You should never, ever waver in your policy decisions.

Next time around, they should also do the tax rate reforms more boldly. The top income tax rate should be not 40%, but closer to 30%, although 20% would be most reasonable. Eliminating only the top bracket was a good move but a little wimpy.

-9 ( +1 / -10 )

I find this whole affair terribly queer and quite upsetting. My home nation seems to be run by people who are stark raving bonkers! The saddest part is the opposition parties haven’t been able to do anything about it. Will Labour take advantage and manage to gain power? However from what I’ve seen that may lead to New Labour MK2, Blair and his chums didn’t do too much in the end to change the dynamics of the nation

0 ( +5 / -5 )

Alfie,

The Guardian "abandoned Julian Assange to his fate."

Lol he made his own fate, tiny little Jules and his proof reality show. If anything the Guardian has given in to extremist feminism.

And Liz truss was clearly installed to fail. The posh boy party knows of the electoral avalanche that is coming. They've been in power too long.

-5 ( +1 / -6 )

ubesh:

I think racism does play a role

Ah, playing the race card, are we? Could it be that Kwasi's plan was just quasi-crazy, as well as selfish, self-serving and plain evil when the ordinary person is suffering because they're forced to help out a corrupt country in eastern Europe through their taxes? British and European politicians have no spine nowadays. Putting the interests of America before the interests of their own people.

Alfie:

The Guardian is a monarchist, sh*t-lib mouthpiece for the British security services that spent years fake-smearing Jeremy Corbyn as an anti-Semite and abandoned Julian Assange to his fate.

The Guardian also needs to realize that not every ethnic minority out there in the world is being discriminated against or needs help from the western savior. The Guardian's great for fitness articles and quizzes, but I give the international politics articles a miss. At the very least, it's disinformation. But they can spell better than the Daily Mail.

1 ( +4 / -3 )

Well, I'm pleased to see that PM Truss has realised the mistake and has rectified it.

-1 ( +2 / -3 )

Very smart to admit when you are wrong

Chucky had no choice

Well, I'm pleased to see that PM Truss has realised the mistake and has rectified it.

She made more than 1 mistake: relieving the UK taxpayers of 2 billion quid for the bankers she still left them with a 63 billion quid burden to shoulder while King Charles could inherit 400 million tax-free. If you asked old Will, he'd tell us "there's something's rotten in the state of Denmark", innit?

0 ( +1 / -1 )

@Lamilly.

The Bank of England stepped in as some pension funds were in danger of collapsing. They were protecting them from the incompetence of the government, not protecting the government.

The decline of sterling means that the BoE will put up interest rates. That will hammer the Tories. The middle classes in the UK - the Tory support base - don't have a lot of spare cash as almost all of their wealth is invested in their property. Many of them have unwisely high mortgages that they can just afford to pay at current rates. That is why interest rates are so sensitive. Those facing soaring mortgage payments or losing their homes, with negative equity icing the cake, will turn on the Tories for their failure.

The Tories have plans to reduce the independence of the BoE so they can take back control of it. Sterling will go down again if they do that. The markets don't trust Truss's regime any more than the rest of us. They are harder to fool than the British public.

This is a Zombie regime. Parliament may yet vote against the unfunded tax cuts. If they do, Truss should stop embarrassing herself and the country and go. She has already flushed what little credibility she had down the toilet.

-1 ( +2 / -3 )

Surely in a nation of 60 million plus they could have come up with someone better than this hopeless woman and the kwasi buffoon?

Sad to see how far the UK is falling.

@Fighto! For the record, the PM was selected by Conservative MP's and party members and not the general public. The UK is not failing.

2 ( +3 / -1 )

This lady is a sure failure for UK..

Keep the downfall with your pathetic Brexit circus..

Surely in a nation of 60 million plus they could have come up with someone better than this hopeless woman and the kwasi buffoon?

Sad to see how far the UK is falling.

Would you like to blame Putin?, don't you?. lol..

-2 ( +2 / -4 )

It is sad that these seemingly unforced errors by the British government in London may lead to further calls for independence by the Scottish nationalists.

0 ( +0 / -0 )

fxgai

This was a very weak move.

Made by a week PM.

Truss is probably right in that the groundwork may not have been laid, but in combination with loads of borrowing from nowhere to pay for energy subsidies, the optics were problematic.

Energy subsidies are necessary, but should be targeted to the poor. Otherwise you end up funding energy companies and don't reduce energy consumption.

But they should have had the guts to stick to their plan. You should never, ever waver in your policy decisions.

Stick to your plan, economy be damned.

What a disaster of plan. Expect a change of government after the next election.

2 ( +3 / -1 )

If the Brits are just reliant and worried about their property wealth then they need a firm boot up their derrières!

An overinflated property bubble economy doesn’t last forever as the Japanese know well.

Liz Truss is trying to grow the economy.

Her problem is that most consumer goods are being made in China.

-1 ( +2 / -3 )

unfunded tax cuts

Oxymoron.

It’s like saying “unspent expenditure”.

Tax revenues are revenues, tax rate cuts or hikes don’t need to be “funded”.

Gordon Brown hiked tax rates, and revenues fell. It was an “unfunded tax hike”?!

Energy subsidies are necessary, but should be targeted to the poor.

Yes, indeed all spending should be targeted at the poor. That way spending could be reduced.

Stick to your plan, economy be damned.

Sticking to your plan is necessary for political survival and credibility.

Haters are going to hate, but if you waver on your policies then even your supporters think you are flakey.

-3 ( +1 / -4 )

fxgai

Stick to your plan, economy be damned.

Sticking to your plan is necessary for political survival and credibility.

Completely agree. Unfortunately, announcing a disaster of a tax plan that has not been costed by the Office for Budget Responsibility, also kills your political survival and credibility.

Haters are going to hate, but if you waver on your policies then even your supporters think you are flakey.

Yup. But many will be breathing a sigh of relief.

1 ( +1 / -0 )

How can you say it was a disaster of a tax plan while saying it hasn’t been costed?

Britain used to have a top rate of tax at 40%, until Gordon Brown hiked it. And that hike didn’t produce the expected revenues, apparently.

Going back to a top 40% rate that served Britain for the prior two decades before that can hardly be seriously described as a disaster.

The disastrous part of the mini budget was the “unfunded spending”, not the elimination of the top tax rate, which would have the effect at the margin of reducing the disincentive to earn extra income in that top tax bracket; the disincentive to work in Britain as a high income earner.

Even 40% is too high if you ask me; 30% as a top rate would mean you get to keep 70% of that extra earned, not a mere 60% or 55%.

-3 ( +0 / -3 )

fxgai

How can you say it was a disaster of a tax plan while saying it hasn’t been costed?

And yet the pound plummeted, they had to bail out pension funds, the IMF condemned it, it wasn't costed (as you point out) and Truss had to do a U-turn on it due to such an extreme backlash.

Yeah. A disaster of a plan.

1 ( +1 / -0 )

Yes but the pound plummeted not solely because of the elimination of the top tax bracket that didn’t exist until 2010…

I mean, huh, the pound plummeted because of the lack of this disincentive to earn a high income in the UK? Really? The rest of the plan, including the billions of new energy subsidies had nothing to do with it?

You were saying it wasn’t “costed”, not me.

If pension funds had to be bailed out because bond yields spiked, I would want my money out of those pension funds!

The IMF doesn’t know what they are talking about with respect to this cut in a penalty for earning additional income.

Truss had it right the first time, except that she she have cut the top rate to lower than 40%, not stop there. If they went to 20% then I might consider immigrating there even. But what’s the point in earning more if you have hand over almost half to the government. Ridiculous policy, and the notion that it would reduce revenues is likely bunk.

Truss and Kwarteng had a chance to do something special but they may have blown it, and may blow it further if this is a precedent.

-3 ( +0 / -3 )

fxgai

Yes but the pound plummeted not solely because of the elimination of the top tax bracket that didn’t exist until 2010…

I mean, huh, the pound plummeted because of the lack of this disincentive to earn a high income in the UK? Really? The rest of the plan, including the billions of new energy subsidies had nothing to do with it?

No. You have it all wrong. The pound plummeted because of the lack of confidence in the leadership and economic direction of the UK government.

I'm not unsympathetic to a tax cut in the UK, but now, when people are suffering from high inflation, rising mortgage payments and a low pound, is probably not the right time to drop the taxes of the richest people in the UK. Especially when doing so will make high inflation, rising mortgage payments and a low pound worse.

1 ( +1 / -0 )

@ Alfie

Funny. The Guardian is a monarchist, sh*t-lib mouthpiece for the British security services that spent years fake-smearing Jeremy Corbyn as an anti-Semite and abandoned Julian Assange to his fate.

The Financial Times is owned by Nikkei, that well-known hard left Japanese media empire....

The Guardian is admittedly, not loony left, but it's certainly loony in a kind of woke, smug, Islington-based, privately-educated and hypocritical way. The Financial Times is just a pinko globalist mouthpiece.

-2 ( +1 / -3 )

No. You have it all wrong. The pound plummeted because of the lack of confidence in the leadership and economic direction of the UK government.

So, not because of the cut to the top tax rate on income then….

On the whole, the tens of billions of extra spending was not a good look from my perspective, although the tax rate changes were a step in the right direction.

I'm not unsympathetic to a tax cut in the UK, but now, when people are suffering from high inflation, rising mortgage payments and a low pound, is probably not the right time to drop the taxes of the richest people in the UK. Especially when doing so will make high inflation, rising mortgage payments and a low pound worse.

The tax rate cut would effect people earning high income, not necessarily the richest people.

But the thing that shouldn’t be missed is that by eliminating the disincentive to work and earn extra income (work produces stuff), the effects on inflation are downwards not upwards. More people working is more people producing more - not inflationary.

As for the higher market interest rates, that’s because of the excessive levels of spending. The government spending is where the inflation has come from. Not due to a tax rate cut that hasn’t even happened.

And if one looks at the tax cuts in the US in 2017, the result after two years (until the pandemic) was low unemployment, low inflation, and record tax revenues. Alas the US politicians blew it with excessive spending too.

-4 ( +0 / -4 )

The very rich, the billionaires do not pay income tax, or very little. They pay the lower rate capital tax. 18% and 28% tax rates.

1 ( +2 / -1 )

As for the higher market interest rates, that’s because of the excessive levels of spending. The government spending is where the inflation has come from. Not due to a tax rate cut that hasn’t even happened.

And if one looks at the tax cuts in the US in 2017, the result after two years (until the pandemic) was low unemployment, low inflation, and record tax revenues. Alas the US politicians blew it with excessive spending too.

why is it that posts on here, almost all topics, that make the most sense, with no derogatory words, always get downvoted?

invalid CSRF

-1 ( +2 / -3 )

Well FizzBit, the mass media clearly doesn’t like the notion of tax rate cuts, and they set out to destroy the policy before it could even be implemented.

Nonsense such as “unfunded tax cut” gets parroted everywhere.

Liz Truss though, has shown herself to be a wimp - not quite the reformer that I hoped, not as Iron as Thatcher. Not sure if she overruled Kwarteng here or they both were wimps about it.

I was reading today how the exchequer reviewed the Gordon Brown tax hike evidence and found quite negatively against it, and yet here the suggestion of reversing the useless and failed tax hike was some kind of disaster…. The media of course doesn’t report about that because it’s not the narrative, but even Truss was too wimpy to back the policy. So did she even understand it in the first place…. I want to believe in her and Kwarteng but their wavering like this gives me a bad impression.

-2 ( +1 / -3 )

fxgai

No. You have it all wrong. The pound plummeted because of the lack of confidence in the leadership and economic direction of the UK government.

So, not because of the cut to the top tax rate on income then….

Most definitely because of the top tax rate on income.

Try and stop to think about how much of a debacle this is. Your default seems to be that everyone reacted wrongly, or at least it was because of the energy relief and not the tax cuts.

-1 ( +0 / -1 )

The elimination of the 45% rate is said to have been in the ball park of 2 billion worth. (Given that the introduction of the 45% rate in 2010 didn’t increase revenues as per the naive math, the 2 billion is dubious, but take it as a ball park figure.)

Compare with 75 billion worth of “unfunded energy subsidies”.

2 versus 75.

The other thing I would say is that the cancellation of the tax rate band elimination didn’t see much of a market impact, relative to what had been seen before. So it was a disaster when initially announced, but ho hum when cancelled.

The media may say that the 2 billion was the problem and not the 75, but I am going to make my own opinion about that.

Your default seems to be that everyone reacted wrongly, or at least it was because of the energy relief and not the tax cuts.

Yes. Looking at the facts and figures, that makes far more sense.

-2 ( +0 / -2 )

fxgai

You are missing the point. (But I'm glad that you now admit that the tax cut would cost - at least we are getting somewhere.)

The pound fell because the markets feared the soundness of the decision making of the new PM and Kwasi Kwarteng over the future path for the public finances. The tax cut in the current environment was a colossal mistake.

The timing couldn't have been worse. They were incompetent. That's what spooks investors.

I doubt that they will be able to survive this.

-1 ( +0 / -1 )

Login to leave a comment

Facebook users

Use your Facebook account to login or register with JapanToday. By doing so, you will also receive an email inviting you to receive our news alerts.

Facebook Connect

Login with your JapanToday account

User registration

Articles, Offers & Useful Resources

A mix of what's trending on our other sites