Liz Truss, the British prime minister, was compelled to make an embarrassing U-turn on 

 October 3rd, abandoning her plans to reduce the highest rate of income tax, which had been a major factor in her party's uprising and the chaos on the financial markets.

On September 23, Truss and her finance minister Kwasi Kwarteng unveiled a new 

 that would reduce taxes and regulations. This would be financed by significant government borrowing, in an effort to revive the economy, after years of subpar development.

The plan, however, caused a crisis in investor confidence in the government, crashing the price of government bonds and the value of the pound, as well as jarring the world markets to the point where the Bank of England was forced to step in with a 65 billion pound ($73 billion) program to stabilize the markets.

When the pound crashed, the internet went crazy. The most popular meme: "It's called soccer now"

Even though it only accounted for about 2 billion of a 45 billion pound tax-cutting plan, the elimination of the top rate of tax was the most eye-catching part of a fiscal package that was to be paid for by government borrowing, with Kwarteng failing to explain how it would be paid for in the long run.

Within hours of Truss' appearance on BBC television to defend the policy, Kwarteng issued a statement in which he acknowledged that it had diverted attention from broader initiatives to support homes during a challenging winter.

"As a result, I'm announcing that the 45p tax rate will not be eliminated. We understand it, we've listened, "In the statement, he stated.

Less than four weeks after taking office, Truss and Kwarteng could face tremendous pressure if they decide to change their minds. In the past six politically contentious years, Britain has had four different prime ministers.

Kwarteng claimed he hadn't given resignation any thought. He said on BBC television that the 45p rate "was just a diversion on what was a very, very powerful set of measures," adding that he and Truss were responsible for the U-turn.

Truss, who came into office on September 6, after triumphing in a race for the party's leadership instead of a national election, said on Sunday that she should have done more to "lay the ground" for the strategy.

Truss had also not disputed the need for public service cost reductions. On Sunday, she resisted promising to raise welfare benefits in accordance with inflation—a poisonous combination.

"It is a positive move from the standpoint of the markets. Markets will need some time to accept the message, but it should lessen the strain "Jan Von Gerich, head of analysis at Nordea, stated.

Since Kwarteng presented the mini-budget, the pound has made up some of its losses versus the dollar. On Monday, it increased by 0.8% in value before declining as Kwarteng spoke to the BBC.

Government bond yields are also still significantly higher, highlighting investors' worries about the path the economy would go under Britain's new government.

To fund tax cuts for the wealthiest, the Conservative Party's senior MPs decreased government spending and increased borrowing, which they said was politically hazardous during a crisis in the cost of living.

The reversal, according to a Conservative MP who preferred to remain anonymous, was unavoidable. Clearly, more structure is required in decision-making, he declared.

UK Reverses Tax Cut: Humility or Humiliation?

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