As it happened: Liz Truss and Kwasi Kwarteng U-turn on scrapping 45p tax rate | Nicola Sturgeon hits out at "utter ineptitude"

Chancellor Kwasi Kwarteng is expected to make an astonishing U-turn over the abolition of the top rate of income tax for the highest earners.

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

Chancellor Kwasi Kwarteng admitted that attending a party with financiers after the mini-budget was “a difficult call” and “it probably wasn’t the best day to go”.

He said the Tory party event had been planned for “a few weeks”.

He told LBC Radio: “I spent, I think, quarter of an hour there, or maybe a bit longer. It was a party event, we have party events all the time.”

Mr Kwarteng added: “I think it was a difficult call and I totally get how it looks. I just feel that it was something that I was signed up to do and I had to do.”

He acknowledged that “with hindsight it probably wasn’t the best day to go”.

Chancellor Kwasi Kwarteng declined to apologise directly to the nation and to Conservative MPs who had been warned over their possible rebellion on tax plans.

Instead he told BBC Radio 4’s Today programme: “There’s humiliation and contrition and I’m happy to own it.”

Chancellor Kwasi Kwarteng did not rule out a new era of austerity to pay for tax cuts.

He told BBC Radio 4’s Today programme: “You will see what our spending plans are in the medium-term fiscal plan but I’m not going to be drawn into that.”

The decision to change course on the 45p tax rate was “not about parliamentary games or votes in the House of Commons” but about “getting people behind the measure”, Chancellor Kwasi Kwarteng said.

Asked on BBC Radio 4’s Today programme if the policy is still the right thing to do or whether he is scrapping the plan because he cannot get it through, Mr Kwarteng said: “It’s not a question of getting it through, it’s a question of actually getting people behind the measure. It’s not about parliamentary games or votes in the House of Commons.

“It’s about listening to people, listening to constituents, who have expressed very strong views about this, and on balance I thought it was the right thing not to proceed.”

The pound has bounced back to levels seen before the Government’s controversial mini-budget as the Chancellor performed a U-turn on the decision to axe the 45p tax rate.

Sterling surged to 1.13 US dollars at one stage overnight, recovering ground lost in the market turmoil sparked by Kwasi Kwarteng’s infamous mini-budget, though it pared back some of the gains in early morning trading to stand at 1.12.

Chief Secretary to the Treasury Chris Philp declined to say whether benefits will be uprated in line with inflation next year.

He told ITV’s Good Morning Britain: “There’s a statutory process, a legal process which the Government goes through every year, it’s led by the DWP (Department for Work and Pensions) Secretary (Chloe Smith), it happens as a matter of routine every autumn.

“That will happen this autumn in the normal way and, when the welfare secretary has made – in consultation with other colleagues in Government – a decision, it’ll get announced to Parliament in the normal way.

“I’m not going to pre-empt that by making any sort of commitment one way or the other – it’s up to that process to carry on as normal.”

On the Government scrapping plans to axe the 45p top rate of tax, the director-general of a free-market think tank said: “I’ve known Liz Truss for many years and I can’t think of another time where she’s changed her mind on anything, anything at all.”

Mark Littlewood, of the Institute of Economic Affairs, told BBC Radio 4’s Today programme: “As a matter of principle I would have liked to have got rid of this rate, I think it’s a complication in the tax code, I think it raises virtually no money.

“It’s even conceivable by scrapping it you might have raised more money.

“But this has become a political hot potato, they have decided this is not the hill they’re going to die on, a tax that raises £2 billion or so.

“And they are going to hope this calms the markets.

“Of course, it will raise the question that the next time Kwasi Kwarteng makes an announcement that Grant Shapps and Michael Gove don’t like, does that announcement stick?”

He later added: “You always worry about that when you see a U-turn… I’ve known Liz Truss for many years and I can’t think of another time where she’s changed her mind on anything, anything at all.”

Chancellor Kwasi Kwarteng should be given the boot after his tax U-turn, according to Liberal Democrat leader Sir Ed Davey.

Sir Ed told Sky News: “I welcome this U-turn but the unfortunate truth is that this Conservative Government is in complete chaos.

“I don’t think the Chancellor has the credibility to make all the changes that are needed and I think he has to go, and I think that would really restore confidence.”

Sir Ed said the Government has made a “small change”, adding: “We need a far more radical overhaul of the Budget, we need it soon and we need it to be done in a transparent way, and I come to the conclusion, regrettably, that I think this Chancellor can’t deliver that.”