Kwasi Kwarteng has scrapped a tax cut for high earners which had been widely criticised for rewarding the rich at the expense of public spending. 

Ten days after he announced the move in the government's mini-budget, the Chancellor said the abolition of the 45p tax rate had become a distraction as he announced the U-turn.

In a statement posted on his Twitter account, he said: “From supporting British business to lowering the tax burden for the lowest paid, our Growth Plan sets out a new approach to build a more prosperous economy.

“However, it is clear that the abolition of the 45p tax rate has become a distraction from our overriding mission to tackle the challenges facing our country.

“As a result, I’m announcing we are not proceeding with the abolition of the 45p tax rate. We get it, and we have listened. This will allow us to focus on delivering the major parts of our growth package.

“First, our Energy Price Guarantee, which will support households and businesses with their energy bills. Second, cutting taxes to put money back in the pockets of 30 million hard-working people and grow our economy. Third, driving supply side reforms – including accelerating major infrastructure projects – to get Britain moving.”

The U-turn came after several Conservative MPs voiced their opposition to the removal of the top tax rate, which has been criticised as rewarding the rich at the expense of everyone else. 

Former cabinet minister Grant Shapps had warned Liz Truss was likely to lose a Commons vote on the plan, and said he would vote against it.

READ MORE: Kwasi Kwarteng's tax rate U-turn shows ‘utter ineptitude’

The Chancellor’s mini-budget triggered turmoil in the City, was criticised by the International Monetary Fund and resulted in a £65 billion emergency intervention by the Bank of England to restore order.

Former cabinet ministers Michael Gove also took aim at the plan to cut income tax for people earning more than £150,000 at a time when millions of people are seeing their family finances squeezed.

Conservative Party Conference 2022Michael Gove at a fringe event at the Conservative Party conference (Stefan Rousseau/PA)

But Mr Kwarteng had insisted his measures were vital to boost growth, and had previously refused to U-turn.

The plan to axe the 45% income tax rate for top earners and scrap curbs on bankers’ bonuses at a time when many households face a cost-of-living crisis has been condemned by political opponents and Tory critics, with Mr Kwarteng bearing the brunt of the criticism.

Prime Minister Liz Truss was criticised for singling Mr Kwarteng out as responsible for the tax cut, saying “it was a decision the Chancellor made” rather than one debated by the entire Cabinet.

Mr Gove toured fringe events at the Conservative Party conference in Birmingham to give his verdict on the plan, which he called “not Conservative”, hinting that he could vote against the measure in the Commons.

Former transport secretary Mr Shapps used a Times column to say “this is not the time to be making big giveaways to those who need them least” because “when pain is around, pain must be shared”.

“This bolt-from-the-blue abolition of the higher rate, compounded by the lack in communication that the PM acknowledges, is an unforced error that is harming the Government’s economic credibility,” he said.

Damian Green, a former deputy prime minister, warned the Tories would lose the next election if “we end up painting ourselves as the party of the rich”.

Tory ex-chancellor George Osborne said it was “touch and go whether the Chancellor can survive” the fallout, telling the Andrew Neil Show it would be “curtains” for Mr Kwarteng if his speech on Monday went badly.

Andrew Bowie, who was parliamentary private secretary to Theresa May when she was in No 10, agreed with Mr Gove that unfunded tax cuts were not Conservative.

Former minister Maria Caulfield said: “I can’t support the 45p tax removal when nurses are struggling to pay their bills.”

The Telegraph reported that a vote on the 45% measure would not be held until after the November 23 financial statement which will set out how the party aims to bring the public finances under control.

Mr Kwarteng is due speak to the Conservative Party conference today, with ear;ly drafts saying he would manage taxpayers’ money with an “iron-clad commitment to fiscal discipline”.

The speech will be keenly watched in the City of London, although it is expected to be delivered around 4pm, shortly before the markets close.

His speech comes with Ms Truss failing to rule out cuts in public spending to help balance the books, and the possibility of benefits facing a real-terms cut as earners on more than £150,000 see their taxes slashed.

The Chancellor is expected to set out further details of his reforms, including the so-called “Big Bang 2.0” package of financial regulation, in the coming weeks ahead of a “medium-term fiscal plan” on November 23, which will be accompanied by the Office for Budget Responsibility’s forecasts.

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.”