Centrist Conservative MPs have vowed to block Liz Truss’s plans for reduced spending on public services and welfare, after a humiliating U-turn on tax left the prime minister’s authority deeply damaged.
One former minister told The Independent that opponents of the PM’s radical economic policies had been “invigorated” by the sight of Ms Truss “blinking” over a scheme to abolish the 45p top rate of tax for the highest earners.
And senior backbenchers made clear that they were ready to do battle on welfare, with two former work and pensions secretaries saying it would be wrong to renege on Boris Johnson’s pledge of an inflation-matching rise and Michael Gove indicating he would need “a lot of persuading” to back cuts.
Chancellor Kwasi Kwarteng was accused of “insulting millions of people” after he made light of his climbdown on a mini-Budget measure which would have handed £2bn of borrowed money to the UK’s highest-paid 600,000 people.
In a speech to the Conservative conference in Birmingham, he received only lukewarm applause from activists after brushing off a week of turmoil in the markets and collapsing Tory ratings as “a little turbulence”.
And there was scorn from some Tories at the claims of the prime minister and chancellor to be putting right the high-tax, low-growth policies of earlier Conservative administrations.
“Liz was a minister in the governments she’s criticising now,” one former cabinet minister told The Independent. “I was sat there in cabinet with her when we agreed the tax rises and she never spoke out against them.”
A new survey put Tories a staggering 25 points behind Labour, in findings which pollsters Savanta said could deliver a three-figure majority for Sir Keir Starmer and near wipeout for the Conservatives, who could be left out of power for a generation.
Mr Kwarteng sparked fresh concern by warning that public services will have to stick to budgets agreed in last year’s Comprehensive Spending Review, despite soaring inflation which has since eaten into their value.
The chancellor is understood to have brought forward a statement on his spending plans – along with the publication of the Office for Budget Responsibility’s judgement on the mini-Budget – from 23 November to this month in a bid to calm the markets.
The independent Institute for Fiscal Studies warned it would amount to an £18bn real-terms cut, including £7.5bn for health and social care and £3.4bn for education. And the Resolution Foundation said the chancellor would have to make “significant” spending cuts if he is to meet his target of debt falling as a proportion of GDP in the medium term, following £43bn of tax giveaways in the mini-Budget.
Meanwhile, Ms Truss has confirmed that work and pensions secretary Chloe Smith is reviewing the promise to uprate working-age benefits next April in line with last month’s inflation figure of around 10 per cent. Reports suggest the hike may instead be linked to wages at 6 per cent.
But newly emboldened Tory backbenchers made clear that they now expect the PM to listen to their opposition, after the 45p row proved that she cannot get her plans through parliament without broad support among MPs – including backers of her leadership rival Rishi Sunak.
“There is a feeling now that there are sufficient people who are opposed to her economic ideas – or panicking about retaining their marginal constituencies – to change things dramatically,” said one MP. “Truss won’t be able to plough on regardless, as she’s tried to do so far.”
Former work and pensions secretary Stephen Crabb said Kwarteng’s about-turn on the 45p rate “doesn’t draw a full line” under resistance to the government’s plans, and said ministers will face “some pretty gritty conversations” over spending cuts with backbench MPs.
A below-inflation benefit uprating would be “the wrong choice”, said Mr Crabb, while one of his successors as work and pensions secretary, Esther McVey, branded it a “huge mistake”.
Kwarteng admits attending champagne party after Budget ‘wasn’t best day to go’
Mr Gove – whose devastating condemnation of the 45p tax move as “not Conservative” holed the policy below the waterline – did not rule out voting against Ms Truss on benefits.
“My overall belief is Boris’s argument was right,” said the former levelling up secretary. “I would need a lot of persuading to move away from that.”
The leader of the One Nation caucus of centrist Tories, Damian Green, said he did not believe Ms Truss could now get welfare restraint through parliament.
The U-turn on tax came after a frantic day of conversations between Ms Truss and Mr Kwarteng on Sunday at a conference spooked by the prospect of a finance bill defeat which could have brought the government down.
Embargoed excerpts from the chancellor’s speech released to the press on Sunday indicated that he intended to stick to his guns, declaring: “We must stay the course.” And the PM defended the tax cut in interviews recorded for regional TV, which were due to be played out yesterday, by which time the policy had been dumped.
In an early-morning TV appearance, Mr Kwarteng appeared to signal that Ms Truss had ordered the climbdown, telling BBC Breakfast: “The prime minister decided not to proceed with the abolition of the rate.”
Ms Truss had already sought to distance herself from the controversial measure, describing it on Sunday as “a decision the chancellor made”.
But Mr Kwarteng later insisted he had been “minded” anyway to make the U-turn, as the policy was becoming a “distraction”. Government insiders described it as a joint decision made in the evening of Sunday, before the pound began to slide on far eastern markets on news of the chancellor’s plans to take a defiant stance.
There was anger from some Tories over senior figures “going missing” after morning TV appearances by Mr Kwarteng and Treasury minister Chris Philp.
Ms Truss cancelled a visit and her deputy Therese Coffey missed a meeting on the conference fringe, while one serving minister told The Independent that Mr Philp had “gone into hiding” after reports he was behind the 45p policy – something his team denied.
Former culture secretary Nadine Dorries turned dramatically on Ms Truss, who she had backed for leader, tweeting that she should call an election to secure her own mandate if she was set on overturning Mr Johnson’s agenda.
And even former Brexit negotiator Lord Frost, normally an enthusiastic backer of the Truss administration, said that over the next year she should “err away from things we know are going to be highly controversial and the losers are going to be extremely visible”.
Nick Timothy, who was a senior Downing Street adviser to Theresa May, said MPs were now “openly talking” about a coup to remove Ms Truss.
“This may be the beginning of an unravelling, because it is quite clear that sizeable numbers of Conservative MPs aren’t in the mood to just go along with what they’re told by the PM and the chancellor,” he told LBC.
“They’re going to need to retreat. They’re not going to be able to act in the radical ways they wanted.”