London Daily

Focus on the big picture.
Tuesday, Jul 22, 2025

How tax cut policy U-turn was decided

How tax cut policy U-turn was decided

Twenty four hours can be a long time in politics. Just ask Liz Truss.

On Sunday morning, she was telling Laura Kuenssberg her plan to scrap the additional rate of tax was here to stay.

Are you completely committed to it? Yes, she replied confidently.

As late as last night, senior ministers were defending the plan in the fringe meetings around the conference.

But something had changed.

The prime minister and chancellor held a series of crisis talks over the course of Sunday, as it became increasingly clear the policy was unsellable.

The telltale signs were there. Conservative MPs were hitting the airwaves and social media to say they thought it was wrong. They had a talisman in the form of Michael Gove. What many had been saying privately was not coming out in public.

The warning they might lose the whip seemed to be counterproductive; it infuriated sceptical MPs who didn't think the prime minister had the authority to see it through.

Grant Shapps - famous around Westminster for his ability to predict the result of votes - warned the government could lose in the Commons. Privately, Labour was confident of the same.

And by the time Mr Shapps appeared on the BBC's News at 10pm - to say the government had got its priorities wrong - the policy was already destined for the dustbin.

It was late evening when the final decision was made. Liz Truss and Kwasi Kwarteng gathered for talks in the Hyatt Hotel in Birmingham, just beside the conference venue. They both now agreed: the policy had to be dumped immediately.

It was agreed the chancellor would kill it off in the morning in his BBC interviews.

Some senior cabinet ministers found out this morning, shortly before the announcement was made and after it had been reported, first by the Sun newspaper.

This is a significant blow for a government that has been in office for less than a month. It's a personal blow for a chancellor who had always prided himself on sticking to his guns.

Despite that, Mr Kwarteng's allies insist he is calm and even relieved that the policy is dead.

"He knew this was going to dominate everything," one says this morning.

But any sense of calm doesn't extend far beyond Mr Kwarteng's hotel room.

Around the conference centre, the Conservative Party feels as febrile as at any point in the past couple of years.

In the words of one former minister: "No wonder Labour are laughing. You couldn't make it up… it's just incompetence."

What's been noticeable is that many true-believers aren't sure she's made the right decision.

I asked one cabinet minister, close to the prime minister, if she'd made the right decision. They shrugged, adding: "There was an inevitability to it."

Others are angrier.

One minister I spoke to put it politely when they said they were "not happy".

"It undermines credibility," they said, predicting that Tory backbenchers would now be emboldened to challenge policies they didn't like, a daunting prospect for a new prime minister just a few weeks into the job.

A backbencher, who opposed the 45p policy, said junking it was bad for the PM's authority: "It looks weak."

Language we couldn't publish has been used more than once this morning.

Another MP who backed Ms Truss for the leadership was more sanguine, but still sceptical: "I'm not sure I would have gone for the u-turn. But she's done it and we need to support her."

But there's also a question mark over the relationship between the prime minister and her chancellor.

She told the BBC on Sunday that the decision to scrap the 45p rate was his. He said this morning that the U-turn decision was hers (he later said it was both of them).

When Ms Truss and Mr Kwarteng moved into Downing Street, they were seen as the closest of political friends. Allies said they would be joined at the hip.

More than a few eyebrows were raised by the willingness to attribute a decision to the other in the past couple of days.

Sources close to them say the idea of a split is overplayed. But a month in, not many people would have expected it to be a discussion at all.

So what state is the government in this afternoon? Battered and bruised? Definitely humiliated? Probably.

Unable to recover? Some Tories think so.

A former minister told me the conference has a "last days of Rome" feel about it. They warned the government hasn't solved the problem of unfunded borrowing, which will still be well over £40bn for tax cuts.

The hope in government will be that by taking this decision quickly, the damage from the 45p row will be limited, and that the government will be able to move on.

But in doing so, the prime minister is admitting her determination to fight for unpopular policies only goes so far.

There is a limit to how unpopular they are prepared to be.


Watch: Prime Minister Liz Truss says she stands by plans announced in the mini-budget


Newsletter

Related Articles

0:00
0:00
Close
US Treasury Secretary Calls for Institutional Review of Federal Reserve Amid AI‑Driven Growth Expectations
UK Government Considers Dropping Demand for Apple Encryption Backdoor
Severe Flooding in South Korea Claims Lives Amid Ongoing Rescue Operations
Japanese Man Discovers Family Connection Through DNA Testing After Decades of Separation
Russia Signals Openness to Ukraine Peace Talks Amid Escalating Drone Warfare
Switzerland Implements Ban on Mammography Screening
Japanese Prime Minister Vows to Stay After Coalition Loses Upper House Majority
Pogacar Extends Dominance with Stage Fifteen Triumph at Tour de France
CEO Resigns Amid Controversy Over Relationship with HR Executive
Man Dies After Being Pulled Into MRI Machine Due to Metal Chain in New York Clinic
NVIDIA Achieves $4 Trillion Valuation Amid AI Demand
US Revokes Visas of Brazilian Corrupted Judges Amid Fake Bolsonaro Investigation
U.S. Congress Approves Rescissions Act Cutting Federal Funding for NPR and PBS
North Korea Restricts Foreign Tourist Access to New Seaside Resort
Brazil's Supreme Court Imposes Radical Restrictions on Former President Bolsonaro
Centrist Criticism of von der Leyen Resurfaces as she Survives EU Confidence Vote
Judge Criticizes DOJ Over Secrecy in Dropping Charges Against Gang Leader
Apple Closes $16.5 Billion Tax Dispute With Ireland
Von der Leyen Faces Setback Over €2 Trillion EU Budget Proposal
UK and Germany Collaborate on Global Military Equipment Sales
Trump Plans Over 10% Tariffs on African and Caribbean Nations
Flying Taxi CEO Reclaims Billionaire Status After Stock Surge
Epstein Files Deepen Republican Party Divide
Zuckerberg Faces $8 Billion Privacy Lawsuit From Meta Shareholders
FIFA Pressured to Rethink World Cup Calendar Due to Climate Change
SpaceX Nears $400 Billion Valuation With New Share Sale
Microsoft, US Lab to Use AI for Faster Nuclear Plant Licensing
Trump Walks Back Talk of Firing Fed Chair Jerome Powell
Zelensky Reshuffles Cabinet to Win Support at Home and in Washington
"Can You Hit Moscow?" Trump Asked Zelensky To Make Putin "Feel The Pain"
Irish Tech Worker Detained 100 days by US Authorities for Overstaying Visa
Dimon Warns on Fed Independence as Trump Administration Eyes Powell’s Succession
Church of England Removes 1991 Sexuality Guidelines from Clergy Selection
Superman Franchise Achieves Success with Latest Release
Hungary's Viktor Orban Rejects Agreements on Illegal Migration
Jeff Bezos Considers Purchasing Condé Nast as a Wedding Gift
Ghislaine Maxwell Says She’s Ready to Testify Before Congress on Epstein’s Criminal Empire
Bal des Pompiers: A Celebration of Community and Firefighter Culture in France
FBI Chief Kash Patel Denies Resignation Speculations Amid Epstein List Controversy
Air India Pilot’s Mental Health Records Under Scrutiny
Google Secures Windsurf AI Coding Team in $2.4 Billion Licence Deal
Jamie Dimon Warns Europe Is Losing Global Competitiveness and Flags Market Complacency
South African Police Minister Suspended Amid Organised Crime Allegations
Nvidia CEO Claims Chinese Military Reluctance to Use US AI Technology
Hong Kong Advances Digital Asset Strategy to Address Economic Challenges
Australia Rules Out Pre‑commitment of Troops, Reinforces Defence Posture Amid US‑China Tensions
Martha Wells Says Humanity Still Far from True Artificial Intelligence
Nvidia Becomes World’s First Four‑Trillion‑Dollar Company Amid AI Boom
U.S. Resumes Deportations to Third Countries After Supreme Court Ruling
Excavation Begins at Site of Mass Grave for Children at Former Irish Institution
×