The pound has now recovered all its losses since Kwarteng’s mini-budget sent it slumping to record lows a week ago.
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The pound has now recovered all its losses since Kwarteng’s mini-budget sent it slumping to record lows a week ago.
Sterling
It’s official: the UK government will not go ahead with its controversial plan to scrap the 45p top rate of tax paid by h igh earners.
Chancellor Kwasi Kwarteng has announced the u-turn on Twitter, declaring:
“We are not proceeding with the abolition of the 45p tax rate. We get it, and we have listened.
Kwarteng says it has become clear that the plan has been ‘a distraction’ from the government’s mission to tackle the challenges facing the UK.
By abandoning it, he says the government can focus on delivering the major parts of its growth package.
Scrapping the abolition of the 45p top end tax rate is a ‘big deal’ for the pound, says Viraj Patel, macro strategist at Vanda Research.
He predicts the pound may push higher this week, as the damage caused by Kwasi Kwarteng’s mini-budget is unwound.
Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets.
The pound is rallying this morning, on reports that the UK government is preparing a screeching u-turn on its plan to abolish the 45p top rate of income tax.
Sterling has jumped by as much as a cent to over $1.126 – its highest level in over a week, just a week after it slumped to a record low around $1.035.
The recovery was sparked by reports chancellor Kwasi Kwarteng may reverse the proposed scrapping of the 45p rate of income tax, just 10 days after it was announced in the mini-budget.
The U-turn comes after strong opposition from several Tory MPs, after the mini-budget caused chaos in the financial markets last week amid concerns that Britain was increasing borrowing to fund tax cuts for the rich.
Last Friday, ratings agency Standard & Poor’s cut the outlook for its AA credit rating for British sovereign debt to “negative” from “stable”, judging that prime minister Liz Truss’s tax cut plans would cause debt to keep rising.
But it’s a remarkable twist; yesterday Truss said she was absolutely committed to abolishing the 45% top rate of tax.
Our Politics Live blogger Andrew Sparrow reports:
Only yesterday Liz Truss told the BBC’s Laura Kuenssberg that she was committed to sticking to the plan, announced in the min-budget, to abolish the 45% top rate of tax. Now the government is set to ditch it – after it became clear on the first day of the Conservative party conference that Truss would face a huge rebellion if she tried to force her MPs to vote for it.
The Sun’s political editor, Harry Cole, first broke the news of the U-turn last night. He is co-writting a biography of Truss, and is one of the journalists seen as being close to her administration.
Andy is covering all the action from the Conservative Party conference here:
European stock markets are set to start the new month with fresh losses, as recession fears mount.
Earlier today, data shows that Japan’s manufacturing activity grew at its slowest pace since the start of last year in September.
Japanese factories were hit by a slide in output and new orders, due to weakening demand from China, the United States and other trading partners.
Joe Hayes, senior economist at S&P Global Market Intelligence, which compiles the survey, explained:
“Weakness in Japan’s manufacturing sector persisted in September and even turned worse.
That’s a bad sign for demand in the global economy.
We’ll also find out how factories in the UK, eurozone and US fared last month, as worries about the global downturn deepen.
9am BST: Eurozone manufacturing PMI report for September
9.30am BST: UK manufacturing PMI report for September
3pm BST: US manufacturing PMI report for September
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