From tax-cutting triumphalism to ditching the plans, how Kwasi Kwarteng U-turned

How Liz Truss and Kwasi Kwarteng rode out financial turmoil and poll slumps before backing down on the abolition of the top tax rate amid Tory anger.

Kwasi Kwarteng
Kwasi Kwarteng

Liz Truss and Kwasi Kwarteng rode out extraordinary financial turmoil and drastic poll slumps for the Tories – even going as far as doubling down on their plans to cut income tax for the richest.

But, as the prospect of a Tory rebellion loomed and senior critics spoke out, the Prime Minister and Chancellor have now performed an astonishing U-turn.

Here is a timeline of how they set out their strategy, insisted it was the right one for the nation amid chaos and then announced they will be backing down.

September 23:

– In a “rabbit out of the hat” surprise, Mr Kwarteng argues the top rate of income tax is far too high and triumphantly tells MPs: “I’m going to abolish it altogether.”

– The pound swiftly plummets to a fresh 37-year low as “spooked” traders swallow the cost of £45 billion of tax cuts to be paid for by borrowing and economists issue warnings.

Prime Minister’s Questions
Mr Kwarteng delivering his mini-budget in the House of Commons (UK Parliament/PA)

September 25:

– The Chancellor is accused of further stoking the flames of financial chaos by saying there is “more to come” when questioned about tax cuts.

September 26:

– After a weekend off, panicked trading resumes and sterling plunges to a record low against the dollar as the price of Government borrowing soars as investors dump UK bonds.

– Downing Street doubles down, with the Prime Minister’s official spokesman saying the mini-budget “includes fundamental supply side reforms to deliver higher and sustainable growth for the long term”.

– The Bank of England warns it “will not hesitate” to raise interest rates to prop up the value of the pound.

Bank of England stability report
Governor of the Bank of England Andrew Bailey (Yui Mok/PA)

– Lenders begin withdrawing mortgage offers as the turmoil spreads to the housing market.

September 27:

– Mr Kwarteng says he is “confident” his tax-cutting strategy will work as he holds talks with major City investors.

– Supporters of Rishi Sunak, the former chancellor who lost out to Ms Truss in the leadership contest, issue warnings about her economic strategy.

Conservative leadership bid
Rishi Sunak had warned against Liz Truss’s plans (Yui Mok/PA)

– HSBC UK removes “new business” residential and buy-to-let products from sale and Nationwide hikes its fixed-rate interest rates on mortgages.

– Bank of England chief economist Huw Pill warns of “significant” interest rate hikes.

– The International Monetary Fund (IMF) issues an extraordinary intervention, urging the Chancellor to “re-evaluate the tax measures” and warning the mini-budget is likely to increase inequality.

September 28:

– The pound takes another hammering while the FTSE 100 of top companies on the London Stock Exchange falls sharply.

– Labour leader Sir Keir Starmer tells the Government to recall Parliament to allow Mr Kwarteng to abandon his strategy “before any more damage is done”.

Labour Party Conference 2022
Sir Keir Starmer demanded a change of course (Peter Byrne/PA)

– A UK government bond market sell-off sees yields on 30-year gilts hit more than 5% – the highest level in 20 years.

– The Bank scrambles to launch an emergency £65 billion Government bond-buying programme after a sell-off in the gilt market leaves some pension funds on the brink of collapse.

September 29:

– London’s FTSE 100 index of companies rally and government gilts regulating the cost of state borrowing ease thanks to the Bank’s action.

– A shock poll puts Labour on a massive 33-percentage point leader over the Conservatives.

– Ms Truss and Mr Kwarteng are adamant their vision is the “right plan”, as the Prime Minister struggles through a series of local BBC radio interviews.

September 30:

– The Office of Budget Responsibility is summoned to a meeting by the PM and the Chancellor. The OBR says it will deliver an economic forecast to Mr Kwarteng on October 7 before publication on November 23.

– Ms Truss admits to broadcasters that the budget caused “disruption”.

October 1:

– The Conservative conference in Birmingham kicks off amid demands for an official inquiry after it emerges Mr Kwarteng attended a private champagne reception with hedge fund managers who stood to gain from a collapse in sterling following his mini-budget.

October 2:

– Ms Truss replies “yes” when asked on the BBC’s Sunday With Laura Kuenssberg programme if she is absolutely committed to abolishing the 45p tax rate.

Sunday with Laura Kuenssberg
Ms Truss tells Laura Kuenssberg she backs the 45p tax cut (Stefan Rousseau/PA)

– The Prime Minister signals tension by saying the plan was not approved by the wider Cabinet and it was a “decision the Chancellor made”.

– She makes the cut even more politically perilous by refusing to rule out real-term benefits cuts being imposed in the same month as the giveaway to the nation’s richest.

– Influential Tory Michael Gove attacks the plans as “not Conservative” as he threatens to vote against the mini-budget.

– 11.40am: The Conservatives issue journalists with a taster of the speech Mr Kwarteng had been due to give at the conference on Monday. “We must stay the course. I am confident our plan is the right one,” he was planning to say.

– Conservative chairman Jake Berry warns any rebels during a Commons vote on the plans will be turfed out of the parliamentary party.

– Damian Green, a former deputy prime minister, warns the Tories will lose the next general election if “we end up painting ourselves as the party of the rich” as other MPs line up to criticise the plans.

– During the course of Sunday, Ms Truss and Mr Kwarteng held talks about the policy.

– Between 4.50pm and 6pm the Prime Minister gave a series of interviews to ITV’s regions, insisting she would not U-turn on the policy.

– Business Secretary Jacob Rees-Mogg urges scepticism about forecasts of the cost of the tax cut, saying they are not “holy writ” and suggesting it may actually bring in more money.

– Former transport secretary and renowned strategist Grant Shapps joins the revolt, calling the tax cut “politically tin-eared”.

– The Sun newspaper gets wind of an incoming about-face at around 11pm before successfully breaking the news in the early hours.

October 3:

– 7:25am: Mr Kwarteng issues a statement saying the cut has become a “distraction” and the Government they will be U-turning: “We get it, and we have listened.”

– 7:50am: Ms Truss tweets her own climbdown, echoing her Chancellor’s words.

– The pound bounces back to levels seen before the mini-budget.

Sorry, we are not accepting comments on this article.

Top Stories

More from the Express & Star

UK & International News