Nicholas Watt
Political editor, BBC Newsnight

Self-doubt is a concept that has rarely troubled Kwasi Kwarteng.

"Don't worry, I'm sure you'll do very well," the teenage Etonian joked to an apologetic admissions tutor, who had turned up late for his interview at Trinity College, Cambridge.

With supreme confidence in his intellectual abilities, Kwarteng went on to dazzle audiences across the worlds of academia and politics with his mastery of multiple subjects.

Kwarteng was first elected to Parliament in 2010 and saw other contemporaries shoot ahead of him up the ministerial ladder.

But one event and two people turned round his political fortunes. He was a genuine supporter of Brexit, believing with his historical overview that it was always going to happen.

"We were always going to leave," he told friends after the referendum.

Kwarteng was a supporter of Boris Johnson who put him on the ministerial fast-track as energy minister in 2019.

Then his political partnership with Liz Truss, a fellow member of the 2010 intake of MPs, paid dividends when she asked him to serve as chancellor.

Read more here.

As part of the mini-budget, the chancellor had pledged to abolish the 45p additional rate of tax, which is paid by people who earn more than £150,000 a year, in April 2023.

It meant the 40% higher rate, for earnings of over £50,270, would have been the top rate, rather than 45%. It would have been a tax saving of nearly £3,000 a year for somebody earning £200,000 annually.

The government said it would affect 660,000 people.

It said the reason behind the tax cut was to make the UK more competitive and to encourage enterprise and investment.

But the plans to scrap the top rate of tax for the richest people in the country drew remarkable opposition from the markets, other parties and a growing number of Tory MPs.

Former minister Michael Gove said the cut displayed the "wrong values", and signalled he wouldn't vote for it. Former Transport Secretary Grant Shapps warned Prime Minister Liz Truss not to have a "tin ear" to voters' concerns about rising living costs and to do a U-turn as soon as possible.

On Monday, Chancellor Kwasi Kwarteng ditched the policy, telling the BBC it had become "a massive distraction on what was a strong package".

A lot of the focus this morning has been on Chancellor Kwasi Kwarteng, but now Prime Minister Liz Truss has also commented.

She has echoed his statements, saying the 45p rate cut had "become a distraction" from the government's economic growth plan.

"We get it and we have listened. The abolition of the 45pc rate had become a distraction from our mission to get Britain moving," she wrote on Twitter.

"Our focus now is on building a high growth economy that funds world-class public services, boosts wages, and creates opportunities across the country."

On Sunday, the prime minister told the BBC the move to cut the top rate of income tax was "a decision that the chancellor made".

But she also said she was absolutely committed to it as part of a package to make the tax system "simpler" and boost growth.

Earlier, the chancellor said he had discussed the 45p rate cut with Truss before the measure was first announced.

"We work as part of the same government," he added.

Chancellor Kwasi Kwarteng has said he "gets how it looks" after it emerged he had attended a champagne reception with City of London financiers on the day of the mini-budget.

He told LBC this morning that "with hindsight it probably wasn't the best day to go" to the Tory party event, which he added had been organised "a few weeks" prior to his tax cuts announcement on 23 September.

Political opponents have called for an official inquiry, following reports in the Sunday Times, external that he attended a private champagne reception with hedge fund managers who were set to profit from a collapse in the value of the pound that accompanied his tax-cutting plans.

The paper reported the drinks were held at the Chelsea home of a financier, where Kwarteng was alleged to have been "egged on" to commit to his plan for £45bn of unfunded tax cuts.

Kwarteng, who worked as a financial analyst at a hedge fund before his career in politics, said he thought he had spent around 15 minutes there "or maybe a bit longer".

He described the reception as a Tory "party event", adding: "We have party events all the time."

Tony Danker, director general of the Confederation of British Industry (CBI), says the 45p rate had become a distraction to Kwasi Kwarteng’s wider growth plans, which contained some “really strong reforms” for business.

He added firms up and down the country “wanted the markets to stabilise”, calling it an “absolute pre-condition to investment and growth”.

“It was absolutely essential to get [these reforms] passed, but the markets were anxious about the package overall,” he told BBC Radio 4's Today programme earlier.

“As we see the markets stabilise, which I very much hope they do, that means, we hope, the investment climate stabilises and we can get onto those economic reforms.”

The pound has bounced back against the dollar to levels seen before the chancellor's controversial mini-budget was announced. At one point overnight, the pound surged to $1.13 - though it moved back to $1.12 this morning.

Following Kwasi Kwarteng's mini-budget, which caused chaos in financial markets, the pound fell to an all-time low of $1.03.

Chris Turner, global head of markets at ING, said the pound seemed to have been saved for now from hitting parity against the dollar.

He added: "It shows Downing Street will show greater respect to financial markets when considering policy options."

Dharshini David
Economics Correspondent

Image source, Reuters

Such an abrupt U-turn on the intended abolition of the 45p rate of income tax is grabbing headlines.

But it will only counter some of the criticism aimed at the so-called mini-budget.

The move will spare the public purse a cost of about £2bn but that's a small part of the £45bn worth of tax cuts the chancellor said he would deliver - the biggest unveiled in 50 years.

It’s the scale of those - and how they would be funded - which disturbs the market and many economists.

Moreover, the rest of that package, including the reversal of the National Insurance hike, will still benefit the better-off more in cash terms.

The same, broadly, is true of the energy help package - for the further up the income scale you are, the more energy you’re likely to use.

The chancellor faced intense questioning from the BBC's Nick Robinson on Radio 4's Today programme this morning. Kwarteng said his decision to ditch the 45p tax rate came after he spoke to MPs and voters, and found it was a "huge distraction". Here are the other key things he said:

Humility: Asked if he owed an apology to the nation and Conservative MPs over the policy, Kwarteng said: "It's about listening to people in the country and actually understanding where people are and actually having the humility to say: 'Look, we got this wrong and we're not going to proceed with the abolition of the rate.'

"There's humility and contrition in that and I'm happy to own it," he added.

Truss backing: His U-turn this morning comes after Prime Minister Liz Truss said on Sunday she was going ahead with the tax cut. But Kwarteng said he spoke to Truss after seeing the "intense focus" on the measure.

He said: "We were absorbing the reaction and we were thinking 'What are we going to do?"'

He said that the 45p rate "fiscally wasn't the most significant by any means" of the policies in the mini-budget.

"We work as part of the same government," he added, insisting he and the PM were in agreement.

Focusing on growth: The chancellor insisted he had not considered resigning, saying: "I have a big job and I need to get growth going in this economy."

Pressure to forecast: He defended the government's decision to deliver the mini-budget without independent analysis from the Office for Budgetary Responsibility (OBR), claiming it would not have been able to produce a forecast in time.

He said the government was preparing a medium-term "fiscal plan" that will be delivered in the coming weeks: "We have to wait 51 days because that is when the OBR will be able to come up with their forecasts. I'm absolutely determined that we get everything aligned and that we do this in a usual way," he said.

He said no further tax cuts would be announced before then.

Shadow Chancellor Rachel Reeves has said the reversal "comes too late for the families who will pay higher mortgages and higher prices for years to come".

The senior Labour Party politician said the "Tories have destroyed their economic credibility and damaged trust in the British economy", calling for them to abandon their "kamikaze budget" totally.

Reeves wrote on Twitter the U-turn was a "distraction" and said the government needed "to reverse their whole economic, discredited trickle down strategy".

Chancellor Kwasi Kwarteng has said the 45p rate of income cut had become "a distraction" from the government's plans to "achieve higher growth".

The chancellor was defending his U-turn on the policy 10 days after it was announced.

"I saw the reaction. We considered what to do with it, and I felt, and the prime minister felt, that this was just a distraction on what is a very strong package," he told BBC Breakfast.

Nick Eardley
Chief political correspondent

What impact will the decision to scrap this policy have? It may quell some of the political criticism. Some will be watching the market.

Labour think it doesn't go far enough, though. The Shadow Chancellor Rachel Reeves thinks the damage is done - that the increase in the cost of borrowing has already happened and that will mean higher mortgage rates.

The party is arguing the U-turn needs to go a lot further.

“They need to reverse their whole economic, discredited trickle-down strategy," Reeves says this morning.

Leader of the Liberal Democrats Sir Ed Davey has called for the chancellor to resign, following Kwasi Kwarteng's announcement that he won't press ahead with a plan to scrap the 45p tax rate.

Speaking on BBC Breakfast, Davey welcomed the change of course, but said the government's whole mini-budget needed an overhaul

He said Kwarteng also had to go as he "doesn't have any credibility any more".

The Lib Dem leader said he'd never been so alarmed and had never heard such levels of anxiety and genuine need from members of the public, adding that's why a new plan was needed urgently and that needed to be delivered by a "totally new chancellor".

Image source, Reuters

BBC Breakfast's Jon Kay spoke to Chancellor Kwasi Kwarteng earlier, pressing him on who made the decision to change course on ditching the top rate of income tax.

Watch their exchange below:

Asked about decisions he has made since taking over as chancellor, Kwasi Kwarteng has denied sidelining the government's spending watchdog, the Office for Budgetary Responsibility (OBR).

In an unusual move, there was no report from the OBR when the economic plans were set out on 23 September, and it's thought this played a part in market jitters.

But in a testy exchange with Nick Robinson on BBC Radio 4's Today programme, the chancellor said the government made decisions at "high speed" and the OBR couldn't get a forecast ready in time.

Kwarteng stuck by his decisions over the last two weeks and also denied he had ignored warnings that the markets would react badly to his plans.

He also denied that the sacking of Sir Tom Scholar, the Treasury's top civil servant, last month had anything to do with his mini-budget.

Image source, PA Media

Grant Shapps - one of the the leading Tory rebels opposing the higher rate tax cut - warned yesterday that the Conservative government would have struggled to get the 45p rate of income tax policy through the House of Commons.

The former transport secretary has been speaking on BBC Radio 4's Today Programme, and says it was a policy that "jarred" with the voters he was speaking to in his constituency.

Ahead of the government's announcement this morning, Shapps has expressed his relief that it will no longer be going ahead.

"It is a sensible response," he says. "I am pleased the government has moved quickly.

"I sensed that things were moving very rapidly last night.

"I want the prime minister to survive and the Conservatives to win the next election. The prime minister has acknowledged this was rushed into and communications where nowhere near good enough."

Nick Eardley
Chief political correspondent

The government isn't saying this morning that it got the policy wrong.

The chancellor has said on his media round that the big problem was that the policy had become a distraction and it was the right thing not to proceed.

Of course, many disagree. Among them are many Conservative MPs who think the government was displaying the wrong values.

That will have been a key calculation for the prime minister and chancellor in making the decision to junk this policy. A growing number of Conservative MPs were prepared to speak out and say the policy was wrong - among them very senior backbenchers. Some believed the government would lose a vote on this in parliament.

We're hearing from the chancellor now.

Speaking to BBC Radio 4's Today programme, Kwarteng said he decided to ditch the 45p rate after speaking to MPs and voters and felt it was a "huge distraction" from the other measures set out in his mini-budget.

Asked why Liz Truss defended the rate yesterday, he said he spoke to Truss after seeing the "intense focus" on the measure.

"We were listening, we were digesting what people we're saying," he says.

Image source, Reuters

The chancellor has finished his interview with BBC Breakfast so we can look in a bit more detail at the remarks Kwasi Kwarteng has just made.

Asked where the U-turn had left his credibility, he said: "We are 100% focused on the growth plan.

"I have been in Parliament for 12 years, there have been lots of policies which, when government listens to people, they have decided to change their minds."

Asked if he had considered resigning, Kwarteng replied: "Not at all.

"What I am looking at is the growth plan and delivering what is a radical plan to drive growth in this country, to reduce taxes, to put more money that people earn in their pockets."

When pressed over whether it was Liz Truss's U-turn, Kwarteng answered: "No, we talked together, I said this is what I was minded to do and we decided together, we were in agreement that we wouldn't proceed with the abolition of the rate."

He also defended the delay on the reversal, saying: "We can always have a debate about when we could've made the decision, but the important thing is we've made the decision and we can now move forward with making the push for the growth plan."

Kwarteng and Truss humiliated and woundedpublished at 07:55 British Summer Time 3 October 2022

07:55 BST 3 October 2022

Chris Mason
Political editor

A fortnight ago at the top of the Empire State Building in New York, the prime minister told me she was willing to do things that were unpopular. That is a theory she very efficiently tested to destruction, her party's poll ratings plunging as deep as that Manhattan skyscraper is tall.

The markets were spooked, Conservative MPs spooked more - this policy was destined to crowd out everything else here for a simple reason. Tory MPs from ministers down said it was unsellable, offering the best paid a tax cut with the prospect of public spending and benefits cuts at the same time.

This leaves the new Chancellor Kwasi Kwarteng - and by extension the prime minister - downcast and humiliated, wounded and weakened. But Liz Truss will hope it creates space to move forward, hauling herself out of the political quagmire of a budgetary statement that imploded on contact with political reality. This is another defining moment for a young government not yet a month old.

Read more here.

Rob Watson
BBC political correspondent

Image source, Rex Features

This is a massive and humiliating U-turn.

It comes only a day after Prime Minister Liz Truss insisted she would not abandon the tax cut for the wealthiest. It would also seem to undermine her central argument that growth depends in large part on lower taxes to attract entrepreneurs.

The government justified the U-turn by calling it a distraction from its wider growth plan.

But maybe the damage is already done in terms of the Truss government’s standing with the voters and the markets.