British Prime Minister Liz Truss was forced on Monday into a humiliating U-turn, reversing plans to cut the highest rate of income tax that helped to spark a rebellion in her party and turmoil in financial markets.

British Prime Minister Liz Truss(right) and Chancellor of the Exchequer Kwasi Kwarteng(right)

Truss, and her finance minister Kwasi Kwarteng, announced a new "growth plan" on Sept. 23 that would cut taxes and regulation, funded by vast government borrowing to snap the economy out of years of stagnant growth.

But the plan triggered a crisis of investor confidence in the government, hammering the value of the pound and government bond prices and jolting global markets to such an extent that the Bank of England had to intervene with a 65 billion pound ($73 billion) programme to shore up the markets.

While the removal of the top rate of tax only made up around 2 billion out of a 45 billion pound tax-cutting plan, it was the most eye-catching element of a fiscal package that was to be funded by government borrowing, with Kwarteng not explaining how it would be paid for in the long-term.

Just hours after Truss went on BBC television to defend the policy, Kwarteng released a statement saying he accepted it had become a distraction from wider efforts to help households through a difficult winter.

"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," he said in the statement.

The decision to reverse course is likely to put Truss and Kwarteng under huge pressure, less than four weeks after they came to power. Britain has had four prime ministers in the last six politically turbulent years.

Kwarteng said he had not considered resigning.

"The 45p rate was simply a distraction on what was a very, very strong set of measures," he told BBC television, adding that the U-turn decision had been taken by himself and Truss.