British pound on a comeback as the UK Government reverses tax cut plan 

Prime minister Liz Truss was forced this morning into a U-turn, reversing its plans to cut the highest rate of income tax that caused turmoil in financial markets. Both Truss and her finance minister announced a “growth plan” on 23rd of September that would cut regulation and taxes, which would be funded by huge government borrowing. However, this tactic has triggered great worries amongst investors followed by the value of the pound and government bond prices plummeting. As well as jolting global markets to the point where the Bank of England had to step in with a £65 billion pound scheme to take some steam of the markets.

The removal of the top rate of tax only accumulated approximately around £2bn out of a £45bn tax cutting strategy, it was the hottest topic in regards with the fiscal package as Kwarteng avoided the explanation of how it would be paid for in the long-term (investing.com). Only a few hours after Truss appeared in her BBC interview, Kwarteng has posted a statement expressing that he has accepted how it’s become a distraction from other efforts to aid households through a difficult upcoming winter.
 

“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” - said in his statement (bbc.co.uk).  

In the last six years Britain has had four different prime ministers, and the last minute U-turn will very likely place Truss and Kwarteng in a bigger spotlight, with less than four weeks since gaining power.

Furthermore, Truss has refused to commit to increasing welfare benefits as the inflation rises, and has not denied that her policy will require spending cuts for public services (investing.com). A dangerous combination that would be snatched by opposition parties.

Nevertheless, Sterling has made some progress against the dollar since Kwarteng delivered the mini-budget, it traded up 0.8% today before sliding back as he spoke with BBC (bbc.co.uk). It is currently around £1.1203 at 09:23 GMT.