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Chancellor Kwasi Kwarteng has confirmed that the government is axing plans to give the wealthiest 1% a tax cut following a bitter backlash from Tory MPs.

Mr Kwarteng said in a tweet that the measure had become a “distraction” from his objective to grow the economy.

He said: “We get it, we have listened.”

Politics live: Major U-turn after prominent Tories speak out

The plan to scrap the 45p rate, which is paid by people who earn over £150,000 a year, was criticised as unfair amid the cost of living crisis.

It was announced in the tax-slashing mini-budget, last Friday, but would have had to go to a vote before it could be approved.

Former cabinet minister Grant Shapps, one of the big hitters in the Conservative Party who had publicly criticised the policy, told Sky News that it would not have got through parliament.

“There is no mathematical way MPs would go and vote for this,” he said.

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Tax cut ‘not my idea’ says minister

The tax cut was one of a series of proposals that prompted turmoil in the markets over the past week, with the pound reaching record lows against the dollar.

The chancellor and Ms Truss spent much of the past 10 days doubling down on their plans, even in the face of criticism from the International Monetary Fund and a £65bn emergency intervention by the Bank of England.

Ms Truss was expected to delay the vote on the 45p rate tax cut to buy herself time, after Conservative MPs were told they would lose the whip (meaning they would be suspended from the party) if they voted against it.

But the rebellion grew overnight as Mr Shapps joined his former cabinet minister colleague Michael Gove in publicly criticising the plans.

Read more:
Truss sticks by plan but admits mistakes
Kwarteng faces calls for inquiry after party with hedge fund managers

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45p rate tax cut ‘didn’t make sense’

Kwarteng ‘not at all’ considering resigning

Mr Kwarteng abandoned the policy hours before he was due to tell the Conservative Party conference in Birmingham that the government “must stay the course”.

The chancellor told BBC Breakfast: “I have been in parliament for 12 years, there have been lots of policies which, when government listens to people, they have decided to change their minds.”

Despite the blow to his authority, he said he had “not at all” considered resigning.

And he declined to apologise directly to the nation, instead telling BBC Radio 4’s Today programme: “There’s humiliation and contrition, and I’m happy to own it.”

Moments after Mr Kwarteng confirmed the U-turn, Ms Truss tweeted the same message.

‘They have destroyed their economic credibility’

The pound surged higher in overnight trading on Monday as reports emerged that the government would abandon the decision to axe the 45p tax rate.

Labour pressed for Ms Truss and Mr Kwarteng to back down on the rest of their tax-cutting mini-budget.

Shadow chancellor Rachel Reeves said the reversal “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,” she said. “Their kamikaze budget needs reversing now.”

The Lib Dems echoed those calls, with leader Sir Ed Davey calling for the Tories to cancel their party conference and recall parliament to “sort this mess out”.

He said: “Every day it becomes clearer this Conservative government has no plan, no clue and is completely out of touch.”

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Two Chinese citizens captured during fighting in eastern Ukraine, Zelenskyy says

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Two Chinese citizens captured during fighting in eastern Ukraine, Zelenskyy says

Volodymyr Zelenskyy says two Chinese citizens have been captured while fighting in eastern Ukraine.

He said his forces had fought six Chinese soldiers and two of them had been taken prisoner. He added he had ordered officials to obtain an explanation from Beijing.

“We have information that there are many more Chinese citizens in the occupier’s units than just two. We are now finding out all the facts,” he added.

As it happened: Zelenskyy demands reaction from US

China is an ally of Russia and has been accused of helping its war in Ukraine, though Beijing has repeatedly denied allegations that it has supplied Kremlin forces with weapons.

“Russia’s involvement of China in this war in Europe, directly or indirectly, is a clear signal that Putin is going to do anything but end the war,” Mr Zelenskyy said. “He is looking for ways to continue the war.”

Mr Zelenskyy described China as having joined Russia’s war against Ukraine and said he expected the US to react.

There was no immediate comment from China.

How many Chinese are actually fighting for Russia?


John Sparks - Africa correspondent

John Sparks

International correspondent

@sparkomat

Were they volunteers – or mercenaries – who had signed up to fight in the Russian army on their own?

Alternatively, does the Chinese government sanction their involvement – or even encourage it? That would make the situation far more serious.

The capture of these Chinese nationals in Donetsk begs another question – how many Chinese are actually fighting for Russia? In his written post on social media platform Telegram, Volodymyr Zelenskyy said “there are many more Chinese citizens” other than these two.

Still, the Ukrainian president works hard to suggest the Chinese, officially at least, are blameless.

“Russia’s involvement of China in this war… is a clear signal that [Russian President Vladimir] Putin is going to do anything but end the war,” he writes on Telegram.

This is a generous interpretation of China’s approach to the conflict, which is quite openly contradictory.

Read more from John Sparks

Fighters of various nationalities have joined Russia’s army during the war, often in return for promises of large sums of money. This does not represent official interventions by their home countries.

North Korea has also sent thousands of its troops to support Russia.

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‘This could be very, very embarrassing for China’

After Mr Zelenskyy’s announcement, the Ukrainian foreign minister said he had summoned China’s diplomat for an explanation, saying on social media the presence of Chinese citizens in Russia puts Beijing’s stance for peace into question.

Read more from Sky News:
Zelenskyy makes dig at US over response to Russian attack
Serious questions raised by captured Chinese national in Ukraine

Ukraine in Belgorod, almost out of Kursk

Last night, Mr Zelenskyy confirmed for the first time that Ukrainian forces are active in Russia’s Belgorod region.

He described the actions as “just”, adding: “war must return to where it came from”.

Meanwhile, regional governor Alexander Khinshtein said Russian forces are on the verge of reclaiming Kursk, months after Ukraine’s surprise incursion.

He claimed Russian forces had seized the settlement of Guyevo. Russian state news agency TASS said only two more settlements are left to recapture – Gornal and Oleshnya – to retake the entire region.

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What we learn from video of captured Chinese national in Ukraine – and the serious questions it raises

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What we learn from video of captured Chinese national in Ukraine - and the serious questions it raises

In a carefully written post on social media platform Telegram, Volodymyr Zelenskyy accused the Russian army of deploying Chinese citizens on the battlefield in eastern Ukraine.

What about the proof? Well, the Ukrainian president says his security services captured two people from China in the Donetsk region – along with identity documents, personal data and their bank cards.

Follow latest: Zelenskyy demands reaction from US

A video of a man in military fatigues who had been captured by Ukraine was pinned to the bottom of the statement.

We get snippets of a conversation where the alleged combatant seems to be talking about the events that led to his capture.

“When we arrived at the place… and then my commander.” The man gestures at the floor and ceiling, making shooting noises. “I was also injured.”

Volodymyr Zelenskyy uploaded  a video appearing to show a Chinese prisoner in Ukrainian custody.
Image:
Volodymyr Zelenskyy uploaded a video appearing to show a Chinese citizen in military uniform in Ukrainian custody

These details will make it difficult for the Chinese government to deny the incident out of hand, although they are highly unlikely to supply additional information.

Important details like, who are they? What function(s) do they fulfil in Ukraine’s occupied territories?

Were they volunteers – or mercenaries – who had signed up to fight in the Russian army on their own?

Alternatively, does the Chinese government sanction their involvement – or even encourage it?

That would make the situation far more serious.

Read more:
Zelenskyy makes dig at US over response to Russian attack
What China could do next as Trump’s tariff war ramps up

The capture of these Chinese nationals in Donetsk begs another question – how many Chinese are actually fighting for Russia? In his post, Mr Zelenskyy said “there are many more Chinese citizens” other than these two.

Still, the Ukrainian president works hard to suggest the Chinese, officially at least, are blameless.

“Russia’s involvement of China in this war… is a clear signal that [Russian President Vladimir] Putin is going to do anything but end the war,” he writes on Telegram.

This is a generous interpretation of China’s approach to the conflict, which is quite openly contradictory.

On one hand, Chinese President Xi Jinping describes China as a neutral party to the conflict, while simultaneously offering Mr Putin long-term political and economic support.

In fact, he described their partnership as a “no limits” one in a phone call with Mr Putin on the third anniversary of Russia’s full-scale invasion of Ukraine.

Mr Zelenskyy then, is making a point with this post – but he does not want to make the situation any worse.

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What China could do next as Trump’s tariff war ramps up

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What China could do next as Trump's tariff war ramps up

The severity cannot be overstated, if an additional 50% tariffs are levied on all Chinese goods it will decimate trade between the world’s two biggest economies.

Remember, 50% would sit on top of what is already on the table: 34% announced last week, 20% announced at the start of US President Donald Trump’s term, and some additional tariffs left over from his first term in office.

In total, it means all Chinese goods would face tariffs of over 100%, some as high as 120%.

It’s a price that makes any trade almost impossible.

China is really the only nation in the world at the moment that is choosing to take a stand.

While others are publicly making concessions and sending delegations to negotiate, China has clearly calculated that not being seen to be bullied is worth the cost that retaliation will bring.

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Tariffs: Xi hits back at Trump

The real question, though, is if the US does indeed impose this extra 50% tomorrow, what could or would China do next?

It has said it will “fight to the end”, but what does that mean?

In reality, there are few good options.

There are some obvious measures that China will almost certainly enact.

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Further export controls on rare earth minerals (crucial for the development of high-tech products) are one example. China controls a huge proportion of the world’s supply, but the US would likely find workarounds in time.

Hiking tariffs on high-impact US products such as agricultural goods is another option, but there is only so far this could go.

The potentially more impactful options have significant drawbacks for Beijing.

It could, for instance, target high-profile American companies such as Apple and Tesla, but this isn’t ideal at a time when China is trying to attract more foreign investment, and some devaluation of the currency is possible, but it would also come with adverse effects.

Other options are more political and come with the risk of escalation beyond the economic arena.

In an opinion piece this morning, the editor of Xinhua, China’s state news agency, speculated that China could cease all cooperation with the US on the war against fentanyl.

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This has been a major political issue for Mr Trump, and it’s hard to see it would not constitute some sort of red line for him.

Other options touted include banning the import of American films, or perhaps calling for the Chinese public to boycott all American products.

Anything like this comes with a sense that the world’s two most powerful superpowers might be teetering on the edge of not just a total economic decoupling, but cultural separation too.

There is understandably serious nervousness about how that could spiral and the precedent it sets.

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