UK scraps tax cut for wealthy that sparked market turmoil

BIRMINGHAM, England (AP) — The U.K. government on Monday dropped plans to cut income tax for top earners, part of a package of unfunded cuts unveiled only days ago that sparked turmoil on financial markets and sent the pound to record lows.

In a dramatic about-face, Treasury chief Kwasi Kwarteng abandoned plans to scrap the top 45% rate of income tax paid on earnings above $167,000 a year, a policy that had drawn near-universal opposition. The pound rose after the government U-turn, trading at $1.13 — just over the value it held before the government's calamitous budget announcement on Sept. 23.

But Kwarteng said the government would push ahead with the rest of its tax-cutting stimulus package. Kwarteng and Prime Minister Liz Truss have spent the last 10 days defending the plan in the face of market mayhem and increasing alarm among the governing Conservative Party.

In a speech to the party's annual conference, Kwarteng acknowledged the plan had "caused a little turbulence."

"I get it. We are listening and have listened, and now I want to focus on delivering the major parts of our growth package," he said, trying to draw a line under 10 days of turmoil.

"We need to move forward. No more distractions. We have a plan and we need to get on and deliver it."

The turnaround came after a growing number of Conservative lawmakers, including former ministers with broad influence, turned on the government's tax plans.

"I can't support the 45p tax removal when nurses are struggling to pay their bills," Tory lawmaker Maria Caulfield said.

The backlash has cast a shadow over the Conservative conference in the central England city of Birmingham, where many delegates express fears that the party, in power since 2010, is headed for defeat in the next election. It's not due until 2024, but the opposition Labour Party has taken a substantial lead in opinion polls.

Truss defended the economic plan on Sunday but said she could have "done a better job laying the ground" for the announcements.

She also said the decision to abolish the top tax rate had been taken by Kwarteng alone. On Monday, Truss' spokesman said the prime minister still had confidence in her embattled Treasury chief.

Truss took office less than a month ago, promising to radically reshape Britain's economy to end years of sluggish growth.