Liz Truss is to execute a humiliating U-turn by scrapping her plan to axe the 45p top rate of tax, after facing a growing revolt from Tory MPs led by former cabinet ministers Michael Gove and Grant Shapps.
After insisting earlier on Sunday that the controversial plan would go ahead, Truss concluded after talks with her senior team that the plan stood no chance of getting through the House of Commons.
On Monday morning Kwasi Kwarteng, her chancellor, was expected to confirm he was abandoning the plan to cut the taxes of Britain’s richest 1 per cent; the 45p rate applies to earnings of over £150,000.
The move is a crushing blow to the authority of the prime minister and chancellor, who misread the mood of their party and country and believed they could push through tax cuts for the rich during a cost of living crisis.
The retreat came on the day Kwarteng will address the Conservative conference in Birmingham and will add to Tory concerns that he and Truss have lost a grip on the government and the economy.
Truss had been warned that she faced defeat in the House of Commons if she persisted with the abolition of the 45p rate, the most controversial element of a debt-funded £45bn package of tax cuts.
Although scrapping the 45p rate would only have cost between £2-3bn a year, it was seen by Tory MPs as totemic of a government that appeared to be losing touch with voters.