Kwarteng drops 45p tax rate cut after Tory revolt and market turmoil

Kwasi Kwarteng has abandoned plans to scrap the 45p rate for the wealthiest after a Tory revolt, in a humiliating turnaround at the Tory conference.

Just 24 hours after Liz Truss insisted the cut - for the wealthiest people in Britain, earning over £150,000 - would go for it, the Chancellor backtracked under fierce pressure.

'We understand and we have listened,' Mr Kwarteng said, qualifying the 45p rate cut "a distraction from our overriding mission to meet the challenges facing the country".

The U-turn comes after Tory big names Michael Gove and Grant Sha pps spoke out against giving huge rewards to the rich when the benefits should be reduced in real terms.

< p>There was a growing likelihood that the plan would be defeated in the Commons, as the Tory revolt was growing - despite the vote being postponed until next year.

The raid will raise fresh questions about Mr Kwarteng's future, after Ms Truss told the BBC that the 45p rate cut was his idea alone.

Liberal Democrat leader Sir Ed Davey called on him to quit, saying he had 'lost all credibility'.

The government is also hoping to ease financial market turmoil, although the £2billion cost of the 45p rate cut is only a small part of the huge increase in government borrowing.

The biggest issue was political - criticism from many conservatives that it meant the electoral death of the party and covered up the welcome freeze in energy bills.

Sunday , Mr Gove warned the 45p cut showed 'the wrong values', saying he would not vote for it, while Mr Shapps called it a 'direct error which damages the Government's economic credibility' .

Mr. Kwarteng will also have to rewrite his conference speech, later on Monday, after the Treasury informed that it would "stay the course" on its policy.

He still faces further uprisings over impending cuts benefits and spending - to help fund deeper tax cuts - and his refusal to reveal the Office for Budget Responsibility's verdict on his plans.

The Chancellor tried to ignoring a n question about whether his own credibility is now damaged, saying: "We're 100% focused on the growth plan.

He told the BBC: "There's been a lot of policies where the government listens to the people and has decided to change its mind."

Mr Kwarteng added: "The Prime Minister has decided not to proceed with the abolition of the rate", before go back to say “we decided together, we agree”.

Mr. Shapps hailed the "inevitable" turnaround, saying, "It's a policy that has rocked. It's a sensible response and I'm glad the government acted quickly. "Yes. This is part of an overall package to simplify and reduce our tax system."

In an early morning tweet, the Prime Minister echoed her chancellor in saying that the government "has listened adding, "Our focus now is on building a high-growth economy that funds world-class public services, raises wages and creates opportunity across the country. »