UK Prime Minister Liz Truss.
Jacob King/PA Images via Getty Images
The pound soared Thursday following reports the UK government is discussing a potential pullback from parts of its mini-budget.
Britain’s currency rose by nearly 2% and nearly recaptured the $1.13 handle against the dollar.
Reports said the government may decide to allow the corporate tax rate to rise next year.
The pound soared Thursday following reports the UK government is discussing a potential pullback from parts of its mini-budget, an economic growth plan that was met with market turmoil after its introduction last month.
The pound shot up by as much as 1.8% to a one-week high of $1.1297 then pared the gain to 1.4%. The key 30-year gilt yield was down 29 basis points to 4.52% after hitting an intraday low of 4.33%.
Talks within the government about the mini-budget included possibly backtracking on freezing the UK corporate tax rate, according to Bloomberg. The government led by Prime Minister Liz Truss had planned to keep that rate at 19% instead of allowing it to rise to 25% next year.
Negotiations also included potential changes to the dividend tax, according to Sky News, which said Conservative Party members of parliament were making their discomfort over the mini-budget “very clear.”
Chancellor Kwasi Kwarteng already nixed a plan last week to scrap a 45% tax rate on high-income earners in response to intense criticism.
The mini-budget’s unfunded tax cuts rocked financial markets, prompting the Bank of England to intervene in the bond market with emergency purchases of long-dated gilts to help ease turmoil for pension funds.
The Institute for Fiscal Studies in the UK said this week the government needs to slash spending or raise taxes by 62 billion pounds ($69 billion) to keep its debt under control under the current tax-cut plans.