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Liz Truss’s Desperate Economic U-Turn

Facing mounting criticism, the British prime minister has abandoned plans to eliminate the top income tax for the richest Britons.

By , a reporter at Foreign Policy.
Chancellor of the Exchequer Kwasi Kwarteng (left) and British Prime Minister Liz Truss watch a tribute to Queen Elizabeth II on the opening day of the annual Conservative Party conference in Birmingham, England, on Oct. 2.
Chancellor of the Exchequer Kwasi Kwarteng (left) and British Prime Minister Liz Truss watch a tribute to Queen Elizabeth II on the opening day of the annual Conservative Party conference in Birmingham, England, on Oct. 2.
Chancellor of the Exchequer Kwasi Kwarteng (left) and British Prime Minister Liz Truss watch a tribute to Queen Elizabeth II on the opening day of the annual Conservative Party conference in Birmingham, England, on Oct. 2. Leon Neal/Getty Images

Welcome to today’s Morning Brief, where we’re looking at Liz Truss’s controversial economic agenda, North Korea’s ballistic missile test over Japan, and Iran’s continuing unrest

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Truss’s Economic U-Turn 

Welcome to today’s Morning Brief, where we’re looking at Liz Truss’s controversial economic agenda, North Korea’s ballistic missile test over Japan, and Iran’s continuing unrest

If you would like to receive Morning Brief in your inbox every weekday, please sign up here.


Truss’s Economic U-Turn 

British Prime Minister Liz Truss has walked back plans to eliminate the top income tax rate imposed on the richest Britons, a central part of her economic agenda that had plunged the country into financial turmoil and forced the Bank of England to declare an emergency intervention

The sudden reversal is an embarrassing blow to the British leader during her first month in office, especially after she made unfunded tax cuts a key campaign pledge and then continued to defend her plans as public backlash mounted. This policy would have removed the 45 percent income tax rate on high-earning Britons who make more than 150,000 pounds ($170,000) per year. 

Within the government, a growing number of Conservative parliamentarians and lawmakers also publicly opposed the policy—further pushing Truss to reverse course. In an effort to separate herself from the controversial policy, Truss said on Monday that Chancellor of the Exchequer Kwasi Kwarteng had been responsible for the plan to scrap the top tax rate. 

“We get it and we have listened,” she tweeted, while adding that the “the abolition of the 45pc rate had become a distraction from our mission to get Britain moving.”

The British economy, which had already been in a fragile state, took a nosedive after the government unveiled its sweeping tax cut plans, sparking panic over the significant government borrowing required to fund them. After the value of the pound plummeted to a record low last week, the Bank of England vowed to purchase government bonds on “whatever scale is necessary” in order to stabilize the market. 

As a cost of living crisis gripped the country, Truss’s move to cut wealthy Britons’ taxes fueled calls for her resignation, and her overall economic agenda was publicly criticized by the International Monetary Fund. Her plans sparked a “crisis of faith” in the government’s ability to revive the ailing British economy, as FP’s Amy Mackinnon and Anusha Rathi explained

“This is a huge vote of no confidence from the markets,” David G. Blanchflower, a professor of economics at Dartmouth College, told them. “And politically, this is a disaster.”

Kwarteng is now expected to unveil new plans to slash the country’s debt this month, in an effort to placate investors and rattled markets. 

“We need to move forward. No more distractions,” he said. “We have a plan, and we need to get on and deliver it.”


What We’re Following Today

North Korea’s ballistic missile test. North Korea has launched a ballistic missile over Japan, forcing Tokyo to issue a rare evacuation warning in northern Japan. Japanese Prime Minister Fumio Kishida denounced the test—the first to be made over Japan in five yearsas “violent behavior.” It marks North Korea’s fifth ballistic missile launch in the past 10 days.

Ukraine’s southern breakthrough. Ukrainian forces broke through Russian lines on the west bank of the Dnipro River and reportedly moved south as far as the town of Dudchany—25 miles from Russia’s previous position, according to Russian military officials who acknowledged the setback; a Russian-installed local official called the situation “tense.”

The move is strategically significant because it threatens to cut supply lines and encircle tens of thousands of Russian troops positioned on the west bank of the river, who could become stranded due to Ukrainian bombing of river crossings around the occupied city of Kherson. “The Russian army has already lost the ability to attack, and today or tomorrow it could lose the ability to defend,” said Oleh Zhdanov, a military analyst based in Kyiv.

Iran blames U.S. for unrest. After remaining silent over the defiant protests that have swept Iran, Supreme Leader Ayatollah Ali Khamenei has blamed the United States and Israel for inciting the unrest in order to destabilize the country. “These riots and insecurities were designed by America and the Zionist regime and their employees,” he said. 

His remarks came a day after Iranian authorities cracked down on demonstrations at Sharif University in Tehran, firing tear gas at as many as 200 student protesters. On Monday, the university held its classes online due to the unrest. 


Keep an Eye On 

Pakistan’s looming food crisis. An estimated 5.7 million people in Pakistan will experience an acute food crisis over the next three months, the United Nations has warned, as the country grapples with the aftermath of months of heavy flooding. According to Pakistani officials, the deluge has impacted 33 million people and killed nearly 1,700. Hundreds of thousands more have been displaced. 

Al-Shabab attack. At least 20 people were killed and dozens more injured after al-Shabab fighters attacked government offices in Somalia’s Hiran region on Monday. The attack came after the Somali government and its allies killed one of the group’s leaders this past weekend. 


Monday’s Most Read

Putin’s World Is Now Smaller Than Ever by Angela Stent

The Russian Warship and the South China Sea by Alexander Wooley

Russia’s Stripped Its Western Borders to Feed the Fight in Ukraine by Robbie Gramer and Jack Detsch


Odds and Ends 

Thousands of spectators congregated in the city of Tarragona in Spain’s Catalonia region on Sunday to watch 41 teams compete in a long-standing Catalan cultural tradition: Who can make the tallest human tower?

Members of the victorious Vilafranca team managed to climb over each other to create a formation that was more than 40 feet tall, the Washington Post reported. But falling is also a risk: Throughout the tournament, 13 people had to go to the hospital, while 71 more were wounded, organizers said.

Christina Lu is a reporter at Foreign Policy. Twitter: @christinafei

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