As it happened: Liz Truss and Kwasi Kwarteng U-turn on scrapping 45p tax rate | Nicola Sturgeon hits out at "utter ineptitude"
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.
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
Former Government minister Robin Walker was among the backbench MPs to welcome the Government’s u-turn on the plan to axe the 45% rate of income tax.
On Monday morning, he tweeted: “Very pleased that the Chancellor & PM have listened to the concerns of myself and other colleagues re scrapping the 45p rate.”
He said: “Now we can focus on the wider plan to grow the economy, cut the lower rate of tax sooner, increase wages & help with the cost of energy.”
George Lagarias, chief economist at Mazars, said: “The Chancellor’s forced U-turn should take some pressure off the pound, for the time being.
“Still, the UK has lost some credibility with international markets over the past few years.
“Despite the pound’s currency reserve status, British risk assets have a long and difficult way before they return as a staple in the portfolios of international long-term investors.”
The pound is still down by more than 17% since the start of the year, adding to the cost-of-living crisis by making it more expensive to import goods, commodities and services.
The Chancellor’s tax U-turn shows the “utter ineptitude” of the UK Government, Scotland’s First Minister has said.
Reacting to the news on Twitter, Nicola Sturgeon said those who called on her government to replicate the tax cut should “be reflecting this morning”.
“UK gov U-turns on top tax rate abolition because it’s a ‘distraction’,” she wrote.
“Morally wrong and hugely costly for millions is a better description. Utter ineptitude.
Labour pressed for Liz Truss and Kwasi Kwarteng to back down on the rest of their tax-cutting mini-budget despite their massive U-turn.
Shadow chancellor Rachel Reeves said the reversal “comes too late for the families who will pay higher mortgages and higher prices for years to come”.
“The Tories have destroyed their economic credibility and damaged trust in the British economy,” she added.
“This is not over – it’s not just some distraction.
“The Tories need to reverse their whole economic, discredited trickle down strategy.
“Their kamikaze Budget needs reversing now. As the party of fiscal responsibility and social justice, it will come to the Labour Party to repair the damage this Tory government has done.”
Gerard Lyons has said it was “incorrect” of Kwasi Kwarteng to claim that the economist did not warn him about the risks of the mini-budget.
Mr Lyons, chief economic strategist at Netwealth, who has been an external adviser to Prime Minister Liz Truss, was asked about the Chancellor earlier telling BBC Radio 4’s Today programme that he could not “remember” being warned by him that the markets would not tolerate unfunded tax cuts.
Mr Lyons told the PA News agency: “Well that’s incorrect. I was very clear.”
Asked if he was pleased about Ms Truss and Mr Kwarteng’s U-turn on scrapping the top rate of income tax for the highest earners, Mr Lyons said: “I have no view on the U-turn.
“I was critical of that immediately after the mini-statement and said so publicly on the record, but it’s up to them what they do in terms of U-turns”.