Following the backlash and economic turmoil unleashed by part of British Prime Minister Liz Truss’ “growth plan”, which has seen the pound sterling decline to its lowest in decades, the government has announced it will not be continuing with the plan to cut income tax rate.

The plan, which was a major part of Truss’ campaign promises, involves cutting the highest income tax rate in Britain – and was quickly announced by finance minister Kwasi Kwarteng.

But in a statement shared online Monday, Kwarteng said the plan “had become a massive distraction on what was a strong package”.

“We just talked to people, we listened to people, I get it,” he added.

The tax policy, which included slashing the income tax rate from 45% to 40%, became the biggest test of Truss’ Conservative government due to the economic turmoil it inspired.

The tax policy came with cuts of £45 billion that would have been the biggest in 50 years if not that it came with devastating impacts that has forced the government to make a U-turn.

It pushed the pound to a historic decline against the US dollar, sparking the burden of increased borrowing for the government as the UK market went into chaos. As a result, mortgage rates soared, and some pension funds struggled to remain solvent.

Kwarteng told the BBC Breakfast the proposal was “drowning out a strong package”, including support for energy bills, and cuts to the basic rate of income tax and corporation tax.

The most controversial aspect of the plan is the decision to grant a big tax cut to high earners while millions of others are battling to pay increasing energy and food bills.

The plan to scrap the top rate of tax had remarkably been opposed by the markets, other parties and a growing number of Tory MPs. The inside criticism from Conservative Party members defied the warning of party chairman Jake Berry, that Tory MPs who voted against the prime minister’s tax measures would lose the whip – being kicked out of the parliamentary party.

Senior Tory Michael Gove hinted on Sunday he would not vote for the plan when it came to Parliament. He said, “I don’t believe it’s right”. The former cabinet minister added that the PM’s decision was “a display of the wrong values”.

The pressure intensified on Truss and Kwarteng over the weekend after their former ministerial colleagues criticized the plan, signaling a potential escalation of the revolt within the Conservative party.

The U-turn was likely forced by the growing criticism, a sign that Truss and Kwarteng will face a high hurdle getting the plan approved in the parliament.

The pound moved up on the news that the abolition of the top rate of income tax was being reversed, briefly climbing more than a cent against the dollar to $1.1263.

But as CNN noted, it will likely only reduce the overall size of the tax-cutting package by £2 billion, leaving the government yet to reassure markets that it has a solid plan to fund the rest.

While the U-turn has marked an early mortifying downclimbing for Truss’ government, Gove said it’s welcomed.

“It’s better to act, it’s better to reverse ferret on something that’s causing a problem like this, and it sends a very important signal to the public and also to the markets that we are serious about sound money,” he told the BBC.

Tekedia Institute congratulates Stanley Jacob for his new role as the Chief Executive, Stanbic IBTC Financial Services. He had served in Mastercard, Ecobank and Standard Chartered Bank at top leadership levels. We thank Stanley for developing our course titled “Building Fintechs and Strong Ecosystems” in Tekedia Mini-MBA. We wish him an amazing moment as he leads Stanbic IBTC Financial Services. Win more markets and business territories.

Tekedia Institute >> more business executives teach here.

It looks very frightening. And as I have written here, we are going into a very dangerous trajectory – and I am very concerned. What we do in Africa, Europe or North America may not really matter for the markets. What will matter is this: how Russia will react as Ukraine through NATO support pushes deeper on its counter-offensive. If Russia responds with tactical nuclear weapons (not even strategic ones), we have a 3rd world war. And if that becomes so, many stock markets will crash. 

More so, if NATO gives Ukraine jet fighters which I think would be the next level of action, Russia may decide to attack a NATO territory where those assets are kept. With that, NATO has to defend the hypothetical every “inch” of its territory.

As I have noted, run away from holding European currencies. Yes; the Euro and British Pounds in the short term are imperiled;  the US dollar remains in a better position if you must trade currencies. And on stocks,  sentiments will play major roles. It may take a step forward but within a week, it will take 5 steps backward until the Ukraine conflict is resolved. 

The farming season is going on without fertilizers from Russia (a significant producer) and the implications will be huge on inflation in 2023 as prices of food items will continue to rise globally. The world is at war, not in the typical sense of it. But the indicators show that 2023 will unleash massive job losses as nations battle slow growth, inflation, etc.

Here are the questions: has a nuclear-armed nation ever lost a war in the world? How do we understand Russia’s future? Pay attention to these if you invest in equities because what those companies do may not matter. The signals are now on Ukraine/Russia.

He is the Global Channel and Partnerships Sales Manager of DigitalEd Canada, a leading edtech company in North America.  He served as the General Manager, Partnership & Alliance Cloud at Globacom. Before Globacom, he was the Senior Manager (Enterprise Business) at MTN Nigeria. Ezekiel Bamigboye is a zen-master of business partnership and growth. And he will be at Tekedia Mini-MBA to educate us on “Unlocking A Business Full Potential through Partnerships”.

“Uwa bu ahia” [the world is a market] the Igbo Nation would say. Yes, if the world is a market, every part of the world is available for business. Most times, the best playbook is forming partnerships and alliances with other entities to unlock the world of opportunities. Join us tomorrow to understand how to do just that. Zoom link in the Board.

Tekedia Institute >> learn from the best