Mr Kwarteng is believed to be preparing to issue a statement on Monday, climbing down over the plan to axe the 45% rate for earnings over £150,000 and pay for it by borrowing.
Liz Truss and Mr Kwarteng had been under pressure, including from senior Tory MPs, to back down on the measure announced in the mini-budget on September 23.
We follow developments live as well as reaction from across the world of politics and the market reaction.
Live updates as Chancellor Kwasi Kwarteng expected to U-turn on scrapping 45p tax rate
Liz Truss and Kwasi Kwarteng have abandoned a plan to abolish the top rate of income tax for the highest earners in an astonishing U-turn.
The Chancellor acknowledged that their desire to axe the 45% rate on earnings over £150,000 in a move to be paid for by borrowing had become a “distraction” amid widespread criticism.
Unsurprisignly the pound has risen this morning, rising to 1.12 from 1.11
Full story on the latest developments HERE
Conservative former Cabinet minister Grant Shapps said he was “pleased” to see the Chancellor acknowledge abolishing the 45p top rate of tax was the “wrong move”.
Mr Shapps was speaking on air on BBC Breakfast when the Chancellor confirmed the U-turn, and on hearing the statement said: “Those are exactly the right words. I actually saw him last night. I encouraged him to say, ‘look we understand, we get this, sometimes you just get things wrong’.
“This was a mini-budget which was done incredibly quickly… I’m very pleased to see him acknowledging that they understood it was the wrong move and fixing that problem.”
Asked if the Chancellor’s position is secure, Mr Shapps said: “I leave positions and things to the Prime Minister and the Chancellor to…”
Being interrupted and asked if Mr Kwarteng is going to be Chancellor at the end of the year, Mr Shapps said: “I want this Government to succeed, right, so I hope that this actually solves this problem and we can move on. That’s what I want to see happen, and I think he’s done the right thing this morning.”
Asked where the U-turn had left his credibility, Kwasi Kwarteng said: “We are 100% focused on the growth plan.”
The Chancellor told BBC Breakfast: “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 it had considered resigning, he said: “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.”
Pressed on whether the 45p abolition had been a mistake, he said: “What I admit was it was a massive distraction on what was a strong package.”
Kwasi Kwarteng suggested he told Liz Truss they needed to U-turn on the abolition of the top rate of income tax for the highest earners.
The Chancellor first told BBC Breakfast that “the Prime Minister decided not to proceed with the abolition of the rate”.
Director-general of The Confederation of British Industry (CBI) Tony Danker has welcomed the Chancellor’s decision to U-turn on cutting the 45p tax rate, saying it become a “distraction” from his other economic reforms which he thinks will “make a real difference to growth”.
He told BBC Radio 4’s Today programme: “Here was a package with some really strong economic reforms that businesses have been waiting for for years in fact and clearly, politically the 45p had become a distraction, and probably more importantly businesses up and down the country want the markets to stabilise, that is an absolute pre-condition to investment and growth.
“And it’s a pre-condition to getting on to these very good reforms, so yes I think it’s a good development this morning.
“What’s really been happening economically with this budget is that a set of very strong economic reforms, which are, by the way, controversial enough in this conference, it was absolutely essential to get them passed, but the markets were anxious about the package overall and I think 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 on to these economic reforms because I think they’ll make a real difference to growth.”
The pound surged higher in overnight trading on Monday as reports emerged that the Government would U-turn on the decision to axe the 45p tax rate.
Sterling hit 1.125 US dollars at one stage, recovering back to levels seen before the mini-budget, though it pared back some of the gains in early morning trading to stand at 1.119.
The market turmoil following Kwasi Kwarteng’s mini-budget had seen the pound fall to an all-time low of 1.03 US dollars.
Nicola Sturgeon tweeted: “UK gov u-turns on top tax rate abolition because it’s a ‘distraction’.
“Morally wrong and hugely costly for millions is a better description. Utter ineptitude.
“Perhaps those who slammed @scotgov for not immediately following suit should also be reflecting this morning…”
Kwasi Kwarteng said he was making the U-turn “in a spirit of contrition and humility” because scrapping the 45p tax rate “doesn’t make sense”.
He told LBC Radio that other parts of the growth package had been welcomed but “there is this one element, which is the 45p rate, which was, I accept, controversial” and “people have said they don’t like it”.
“I’m listening, and I get it, and in a spirit of contrition and humility I have said ‘actually this doesn’t make sense, we won’t go ahead with the abolition of the rate’.”