Oct 3, 2022
UK abolishes plan to cut tax on high earners following backlash Transcript
The U.K. government has reversed its plan to scrap the top rate of income tax after public backlash and major market turbulence. Read the transcript here.
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A developing story this weekend: the UK Government reversing a plan to scrap the top rate of income tax after public backlash and major market turbulence. CNBC’s Arabile Gumede is standing by in Birmingham, where British Conservatives have gathered ahead of this fiscal U-turn by trusts. And Arabile, this is a crazy situation. It gets a little convoluted, but the tax rate there, I think was 45%; they had planned to roll it back to 40%, and now are saying, “Uh-oh, it doesn’t look like the markets will accept this.”
Arabile Gumede: (00:31)
Yeah, so a few credibility issues coming to the fore, right, Becky? It certainly is the case. Early this morning, we got word, then, that the UK Chancellor of the Exchequer, that being the Finance Minister, Kwasi Kwarteng, had decided to reverse his decision that he had set forth on September the 23rd, which was to cancel and abolish, as he had put it, that upper tax rate of 45%, which of course impacted the wealthy; today, doing away with the abolishing of that top tax bracket, instead saying that it had become a distraction to what he believes was still a great growth plan for the UK economy.
Arabile Gumede: (01:08)
Markets have stabilized somewhat on the back of that. We saw the pound early this morning gain around seven tenths of a percent, that strength perhaps weakening off just a little bit. We even saw predictions on interest rates perhaps not set to hit that 6% mark and instead hit around 5.5% to 5.75%. It doesn’t take away, of course, that impact on the gilt market where the BoE, the Bank of England, has indeed intervened and said that they will throw around £5 billion per day to try and shore up that gilt market.
Arabile Gumede: (01:39)
So questions around stability still at the fore. We are expecting Kwasi Kwarteng to still speak to the market, and that’s said to happen in around four hours’ time, and that will give a clearer message then to the market as to where to from here, and perhaps give a sentiment as to what the mandate is then from the Conservative party here at the conference in Birmingham, England.