British pound jumps on reports UK government may reverse parts of its tax-cutting proposals

LONDON — Sterling jumped against the U.S. dollar on Thursday following multiple reports that the British government is in talks to scrap parts of its unfunded package of tax cuts.

The British pound traded 1.8% higher at $1.1302 during late afternoon deals in London, after briefly paring gains on robust U.S. inflation data.

After turning positive for the session in mid-morning trade, sterling rose sharply on reports Prime Minister Liz Truss could be poised to make changes to the government’s fiscal plan.

Long-dated U.K. government bonds — known as “gilts” — rallied sharply, pushing yields down to just over 4.41%.

Sky News reported discussions were underway in Downing Street over whether to reconsider some of the market-rocking tax cuts that Finance Minister Kwasi Kwarteng’s announced on Sept. 23. It is thought changes to corporation tax and dividend tax are to be reconsidered.

Truss has repeatedly defended the government’s radical economic plan, despite the proposed measures sending financial markets into a tailspin as investors sold off the pound and ditched U.K. bonds.

Last week, Kwarteng reversed a plan to scrap the top 45% rate of income tax paid on earnings above £150,000 ($167,646) a year following a growing public backlash.

Truss and Kwarteng have both insisted the government’s proposals are necessary to get the economy growing.

Speaking from Washington, D.C. on Thursday, Kwarteng responded to questions about a possible U-turn by saying he is “totally focused on delivering the growth plan” and that he is “not going anywhere,” following calls that he and the prime minister should resign.

Truss’s official spokesperson told CNBC that the government’s position had not changed when asked about reports of the reversals.