Liz Truss has U-turned and SCRAPPED her most divisive tax cut for the rich after a Tory revolt.
The humiliated Prime Minister dropped her plans to axe the 45p top Income Tax rate just a day after saying she was "absolutely committed" to it on national TV.
As reports emerged of a U-turn in the small hours, one ex-Cabinet minister branded the PM a "dead woman walking" who would be gone by Christmas.
Yesterday, Ms Truss told the BBC: "It is part of an overall package of making our tax system simpler and lower." And Chancellor Kwasi Kwarteng was due to tell the Tory conference this evening in his keynote speech: "We must stay the course. I am confident our plan is the right one."
But today Mr Kwarteng admitted “we saw people’s reactions” and the 45p tax cut “was drowning out a strong package of intervention".
He tweeted: "It is clear that the abolition of the 45p tax rate has become a distraction from our overriding mission to tackle the challenges facing the 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."
Ms Truss tweeted: "We get it and we have listened. The abolition of the 45pc rate had become a distraction from our mission to get Britain moving. Our focus now is on building a high growth economy that funds world-class public services, boosts wages, and creates opportunities across the country."
The cut in tax from 45% to 40% on earnings over £150,000 costs £2bn a year and hands a £10k-a-head average saving annually to 660,000 very wealthy people.
At the same time, Liz Truss is refusing to say benefits will be raised by inflation next April - with insiders instead looking at raising them by average earnings, which are lower.
Some Tory MPs - and the financial markets - will still be unsettled.
Bankers' bonuses are still being axed, and Stamp Duty, corporation tax, National Insurance and the 20p rate of Income Tax are all still being cut, funded by around £70billion of borrowing a year.
Mr Kwarteng today repeatedly refused to rule out more U-turns over the mini-Budget, and said no more tax cuts will take place ahead of a full Budget next Spring.
He also refused to rule out a new "era of austerity" to pay for his plans, telling Today: “You’ll see what our spending plans are in the medium-term fiscal plan [on November 23] and I’m not going to be drawn into that.”
Shadow Chancellor Rachel Reeves said: “The Prime Minister has been forced to abandon her unfunded tax cut for the richest one per cent - but it 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. There’s no plan to clear up the mess of 12 years of Tory government. They’re making it up as they go along.
“Their kamikaze Budget needs reversing now."
Lib Dem Leader Ed Davey said: "The Conservatives must now cancel their conference and recall Parliament, to sort out this mess for the sake of the country.
“The corporation tax cut and the bankers bonus rise need to be scrapped and we need a clear plan to help mortgage borrowers cope with eye-watering interest rate rises."
Asked if he had considered resigning, Mr Kwarteng told the BBC: "Not at all!"
He added: "What was clear talking to lots of people up and down the country - talking to MPs, talking to voters, talking to our constituents - was that the 45p rate was becoming a huge distraction."
The first signs of a crack yesterday came when the Prime Minister admitted "it was a decision the Chancellor made" that wasn't approved by the Cabinet.
Today Mr Kwarteng refused to say who made the decision to U-turn, saying he and Liz Truss "had a conversation as we always do."
Ex-minister Michael Gove the toured fringe events at the Tory conference in Birmingham to blast the plan as "not Conservative". He hinted he could vote against in the Commons, breaking the whip for the first time, and said it would be "very, very, very" hard to justify cutting benefits at the same time.
Former transport secretary Grant 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 after 4pm today 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."
In a speech to Tory activists after 10pm last night, Liz Truss made no mention specifically of the 45p tax rate.
But she did thank the financial services industry, telling the ConservativeHome party: "Business is a good thing.
"Making profit is a good thing. The City is a good thing. And our financial services are a good thing."
She added: "We need to level up and have investment and it's only by having a successful City of London that we'll do that."
Former leadership contender Penny Mordaunt pleaded "keep calm, carry on!" as she joked to activists last night: “What have we learned so far in conference? We’ve learned that our policies are great, but our comms is s***!"
At a rowdy late-night event for Tories in communications, Ms Mordaunt said it was "perfectly possible" for the Conservatives to win the next election.
But she refused to give a score out of 10 for how likely Liz Truss was to still be Prime Minister by then.
Instead she said: "We are going to win or lose the next election by what we do to boost growth and to deliver for the general public.
"I wouldn’t have backed her if I wasn’t confident she could do it. We have to have the kahunas to stay the course and we have to get our communications right."
She added: "It is perfectly possible for us to not just win the next general election but win it with a sizeable majority.
"If we don’t do that then everything we’ve been through, all the gymnastics over Brexit, everything will be for nothing. We’ve got to unite in order to be able to do that."
It came as Britain’s most respected pollster said the Tories’ poll collapse is quicker than Black Wednesday - and there is a “risk history will repeat itself” with a Labour landslide.
Prof Sir John Curtice said there has been a 7% swing from the Tories to Labour in the last week, adding: “Actually within a week of Black Wednesday the swing was only half that.
“So we have already seen a swing against the government on the scale we found after Black Wednesday in the wake of a month, in the course of a week”.
Sir John said the polls could be “exaggerated” by Labour conference but added: “Whatever the merits of Liz Truss’s package, it has resulted in very serious electoral damage done to the Conservative Party as an institution and to its new leader.”
And asked what Labour’s current 23-point average lead would mean in an election, he told a fringe event hosted by the Demos think tank: “It’s a Labour overall majority in three figures. This is not difficult. But always at this stage one says it’s two years to go and all the rest of it.”
