Liz Truss has been told to ‘get a grip’ and warned she will ‘live or die’ by the economy as a civil war rages between Tory MPs – but the PM has refused to rule out further U-turns over tax policy.
Her shock decision to abandon plans to scrap the top rate of income tax has alarmed supporters already worried about her determination to pursue the rest of her radical programme.
The Prime Minister’s critics, including Michael Gove, seized on the climbdown over the 45p rate and immediately started targeting other parts of her agenda, such as capping a rise in benefit payments.
‘Her position is such that she really can’t afford to make any more mistakes,’ said a former minister who backed her leadership bid. ‘She has basically used up all her nine lives in one fell swoop.’
A Cabinet source also voiced disquiet, saying: ‘The trouble with U-turns is that every time you make one you get weaker.
‘Boris had too many U-turns, Theresa had far too many. We are trying to do some very difficult things and we cannot afford many more.’
Former Home Secretary Priti Patel has also fired a warning shot over Ms Truss’ unfunded tax cuts, saying Tories will ‘live or die’ by their economic credibility.
She will today accuse the PM and Mr Kwarteng of ‘spending today with no thought of tomorrow’.
Ms Patel will also call on Ms Truss to put a ‘ceiling’ on spending in the public sector, adding that there is a cap on ‘the amount we can afford’, The Times reports.
She will say: ‘We are spending today with no thought of tomorrow, and like the Blob in the old horror film, the more resources are absorbed today, the bigger the problem gets and the more resources it will need to eat up tomorrow.
‘Right now, we have got into a pattern of borrowing huge amounts to fix today’s urgent problems or generate short-term populist headlines.
‘Each time it seems that there’s a good case, but what does this mean for future generations?
‘I want to see our party regain its credibility by restoring its commitment to sustainable public spending, which is affordable today, tomorrow and for the foreseeable future.’
Liz Truss was under fire from senior Tories last night for caving in over tax cuts
Kwasi Kwarteng formally dropped the plan to scrap the 45p tax rate – paid by workers on more than £150,000 – yesterday morning, less than 24 hours after the PM had insisted she was ‘absolutely committed’ to it
Meanwhile, Ms Truss is also facing a battle with her party over reducing benefits in real terms.
She is understood to be considering not increasing Universal Credit in line with inflation, having yesterday axed the 45p top rate of tax.
Ms Truss would instead use a lower metric, such as the rise in average earnings, to encourage those receiving benefits into employment, The Telegraph reports.
It has resulted in growing unease within the top of the party, with some Cabinet ministers said to believe that refusing to increase benefits in line with inflation to be a ‘non-starter’.
But Ms Truss will argue whether it is fair to increase benefits when workers are getting real-terms pay cuts.
It comes after Mr Kwarteng formally dropped the plan to scrap the 45p tax rate – paid by workers on more than £150,000 – yesterday morning, less than 24 hours after the PM had insisted she was ‘absolutely committed’ to it.
The Chancellor took responsibility for the change of direction, saying ministers had ‘got it wrong’. He added: ‘I’m listening, and I get it, and in a spirit of contrition and humility I have said “actually this doesn’t make sense, we won’t go ahead with the abolition of the rate”.’
Miss Truss yesterday said the issue had become ‘a distraction from our mission to get Britain moving’.
In an LBC interview to be broadcast this morning, the PM was asked six times to rule out further U-turns but would only say: ‘I’m determined to carry on with this growth package.’
Mark Littlewood of the Institute of Economic Affairs, which backed the tax cut, acknowledged it had become ‘a political hot potato’ but voiced concern over it being dropped.
He said: ‘Of course, it will raise the question that the next time Kwasi Kwarteng makes an announcement that Grant Shapps and Michael Gove don’t like, does that announcement stick?
‘You always worry about that when you see a U-turn. I’ve known Liz Truss for many years and I can’t think of another time where she’s changed her mind on anything, anything at all.’
In an LBC interview to be broadcast this morning, the PM was asked six times to rule out further U-turns but would only say: ‘I’m determined to carry on with this growth package’
The warnings came as:
- Downing Street insisted Mr Kwarteng’s job was safe despite the blow to his credibility;
- Miss Truss prepared for another clash with critics over plans to squeeze £7billion from the benefits bill by raising payments in line with earnings rather than inflation;
- Mr Kwarteng offered a further concession to critics by revealing his plans for bringing down government debt will now be fast-tracked;
- Two opinion polls put Labour 25 and 28 points ahead of the Tories just a month after Miss Truss took charge;
- A blame game erupted over who first proposed scrapping the 45p tax rate;
- The pound surged above the level it was trading at before the emergency Budget triggered a slump;
- Home Secretary Suella Braverman revealed plans to crack down on the number of foreign students allowed into the UK;
- Former Cabinet minister Nadine Dorries warned the PM might have to hold an election if she departed further from Boris Johnson’s agenda;
- Business Secretary Jacob Rees-Mogg revealed that decisions on whether to allow fracking would not be put to local referendums. Yesterday’s tax U-turn came despite repeated insistence from both the PM and Chancellor that they were behind the cut. Miss Truss is understood to be frustrated at having to back down, telling colleagues it ‘hurt’ to lose such a ‘totemic’ measure.
She is also said to be mystified by the decision of many Conservative MPs to publicly oppose a significant tax cut.
She is expected to use her main conference speech in Birmingham tomorrow to insist that her vision of lower taxes and less red tape is the only way to tackle anaemic economic growth.
In his address yesterday, the Chancellor acknowledged it had been a ‘tough’ day but added: ‘We can’t sit idly by. What Britain needs more than ever is economic growth and the Government is wholly committed to economic growth.
‘That is why we will forge a new economic deal for Britain backed by an iron-clad commitment to fiscal discipline.’
A senior Conservative source said that by Sunday evening the PM and Chancellor had decided that the controversy over the 45p tax rate was diverting too much attention from the Budget’s ‘core package’ of help with heating bills, tax cuts and reforms to boost growth.
It followed a rebellion led by former Cabinet ministers Michael Gove and Grant Shapps who warned that they and other Tory MPs were willing to join forces with Labour to defeat the plan in the House of Commons. Mr Gove said the plan to cut taxes for people earning more than £150,000 a year was a ‘display of the wrong values’. Mr Shapps said the ‘politically tin-eared’ move had ‘managed to alienate almost everyone’.
But Paul Johnson, director of the Institute for Fiscal Studies, predicted that more U-turns were likely. He said not scrapping the 45p tax, a policy which would have cost £2billion a year, was only a ‘rounding error in the context of public finances’.
With around £43billion of unfunded tax cuts remaining, Mr Johnson warned: ‘The Chancellor still has a lot of work to do if he is to display a credible commitment to fiscal sustainability.
‘Unless he also U-turns on some of his other, much larger tax announcements, he will have no option but to consider cuts to public spending: to social security, investment projects or public services.’
The late-night crisis meeting in Liz’s 22nd floor Hyatt suite where the lady decided she was for turning: ANDREW PIERCE reports on a dramatic day at the Tory party conference
By Andrew Pierce for the Daily Mail
Sunday night in the Malmaison Birmingham hotel, and Chancellor Kwasi Kwarteng looked uncharacteristically subdued.
Hours earlier, he had shown the Prime Minister a draft of his speech for the following day, in which he intended to vow – in the teeth of furious opposition – to ‘stay the course’ on the Government’s controversial plans to axe the 45p top rate of income tax.
Yet there were already signs that the policy might be doomed.
Kwarteng had, in truth, been growing increasingly frustrated. In his mini-Budget just nine days earlier, he had frozen the country’s energy bills at a cost of perhaps £65billion, promised to reverse his predecessor Rishi Sunak’s hated hike to national insurance and even to cut a penny off the basic rate of income tax. Each of these would help ordinary people, not millionaires.
And yet all the media and Opposition could talk about was the decision to abolish the 45p rate for those earning £150,000 and above. The policy might cost perhaps £2billion – and could, he reasoned, conceivably pay for itself. It was a sideshow – but a political nuclear warhead.
MP Grant Shapps called the 45p scheme ‘an unforced error that is harming the Government’s economic credibility’
At dinner at the Malmaison – held in the shadow of Birmingham’s International Convention Centre, the venue for this year’s Tory party conference – Kwarteng was still publicly toeing the party line. He defended the cut with customary ebullience – but this could have been mere bravado.
I have learnt that, shortly before the dinner, ex-minister Grant Shapps – an old friend of Kwarteng’s and an increasingly noisy critic of the tax-cut – had shown the Chancellor a spreadsheet on his mobile phone.
Shapps, a self-confessed political geek, had mapped out Tory MPs’ voting intentions – and the numbers looked grim.
Dozens of backbenchers were resolutely against the policy, planning either to rebel by voting with the Opposition or abstaining altogether.
Casually, between sips of fizzy water instead of his usual white wine, Kwarteng told his fellow diners that the vote on the mini-Budget would now be held after November 23 – the date of his planned ‘financial statement’ outlining how he intended to pay for all his generous tax-cutting. (Today, there appeared to be another U-turn with news the mini Budget may be brought forward to this month.)
Shapps himself – who called the scheme ‘an unforced error that is harming the Government’s economic credibility’
A number of senior Tories had spent Sunday lambasting the 45p cut, in what amounted to a gift to Labour. As well as Shapps himself – who called the scheme ‘an unforced error that is harming the Government’s economic credibility’ – serial backstabber Michael Gove had been scathing.
On Laura Kuenssberg’s political show on BBC One that morning, Gove said the cut had ‘the wrong values’ and added devastatingly that it was ‘not Conservative’.
The Prime Minister, too, had for days been defending the policy to the hilt – including on Miss Kuenssberg’s show. ‘I stand by the package we announced,’ said Miss Truss.
However, in comments that dismayed her own party, the PM also admitted that the 45p cut had not been agreed in advance by the Cabinet, adding for good measure that it was the ‘Chancellor’s policy’.
Tory MPs were appalled that Truss appeared to be blaming Kwarteng for the unpopular policy. Ex-Cabinet minister Nadine Dorries accused her of ‘throwing the Chancellor under a bus’. (Friends of Miss Truss insisted to me that ‘she was just answering directly’.)
On Laura Kuenssberg’s political show on BBC One that morning, Gove (left) said the cut had ‘the wrong values’ and added devastatingly that it was ‘not Conservative’
Only minutes after the Kuenssberg interview ended, an ashen-faced Cabinet minister told me: ‘This measure won’t get through the Commons – too many MPs will vote against it. If we back it, we will be given a terrible time in our constituencies and on social media. It has to go.’
Shapps himself – who called the scheme ‘an unforced error that is harming the Government’s economic credibility’, saying: ‘I have been called away on urgent government business.’ He had, I have established, been summoned by the Prime Minister.
As the day wore on, the chaos persisted – and perhaps Miss Truss began to realise that the lady might be for turning after all. By 9pm, Penny Mordaunt, the Leader of the Commons, was discussing the 45p row at a fringe meeting when she said: ‘It’s nearly Monday, and what have we learned so far in conference? We’ve learned that our policies are great, but our comms [communication] is s***.’
At the Malmaison dinner at 9.45pm, the Chancellor’s phone rang. He apologised and announced that he had to go. He had been called to the Prime Minister’s suite on the 22nd floor of the Hyatt hotel for what has been described as a ‘crisis meeting’.
At 9.45pm, Kwarteng was called to the Prime Minister’s suite on the 22nd floor of the Hyatt hotel for what has been described as a ‘crisis meeting’
The purpose of the meeting was clear. The tax plan, Truss and Kwarteng agreed, had to go: it was overshadowing everything else.
‘We were losing control of the agenda,’ says a key supporter of the PM. ‘It was not turning into a triumphant first party conference for Liz as leader.’
At the heart of the U-turn was a simple political calculation. Yes, the Opposition and the BBC would make hay out of the Government performing a U-turn on a flagship policy. (And, indeed, Radio 4 presenter Nick Robinson could scarcely conceal his glee on the Today programme the following morning as he mercilessly needled the Chancellor during the 8.10am interview.) But leaving the tax cut in place risked undermining the government’s entire agenda.
A little after 10:30pm, Truss and her team arrived for a reception at The Cube restaurant, with its panoramic views of the city. The event had been arranged by the Conservative Home website – the bible of the Tory faithful – and was co-hosted by officers from the Tory party’s 1922 committee.
The wine was flowing liberally, but Truss abstained. After she was introduced by 1922 chairman Sir Graham Brady, there were loud cheers when Truss cried: ‘Frankly, we haven’t made enough Conservative arguments for the past few years!’ It was a bravura performance. Yet she knew the U-turn, to be announced imminently, was going to cost her.
By 11pm, Truss had appeared before the 1922 Committee with a bravura performance. Yet she knew the U-turn, to be announced imminently, was going to cost her
Back in her suite after 11pm, her team scoured the early editions of the next day’s newspapers. Most were leading with gruelling headlines predicting a ‘Tory revolt’ over the tax plans. At least 36 Tory MPs, the number required to defeat the Government, were set to vote against.
The whips, who are in charge of party discipline, had failed to order backbenchers to toe the line on the tax cut in advance of conference. They were said to be ‘blindsided’ by the scale of the mounting rebellion.
As the final details of how to frame the surrender were being thrashed out in the PM’s suite, the new party chairman Jake Berry, a ‘Red Waller’ who had warned Tory MPs they faced suspension if they voted against any of the Budget, was hosting a late-night drinks party nearby.
The chairman seemed on edge. His telephone would not stop ringing. It was clear to everyone present that something major was happening. The Daily Mail heard of the U-turn shortly before 10:30pm. The paper updated its front page to carry a new headline: Are Tories on brink of 45p tax U-turn? Our story highlighted the roles of Gove and Shapps in leading the revolt.
All told, it was an unholy political mess – and a disastrous day at conference. This morning, the Government moved to damage limitation. By dawn, Wendy Morton, the Chief Whip, was hastily ringing the Cabinet, with one minister telling me they were informed of the U-turn at 7am – just 25 minutes before the Chancellor himself confirmed it on Twitter.
‘By dawn, Wendy Morton, the Chief Whip, was hastily ringing the Cabinet, with one minister telling me they were informed of the U-turn at 7am – just 25 minutes before the Chancellor himself confirmed it on Twitter’
Five minutes before Mr Kwarteng’s announcement – ‘We get it, and we have listened,’ he wrote online – I bumped into the Chancellor himself in the conference centre. ‘Anything you’d like to share with us, Chancellor?’ I asked him. He smiled grimly, keeping his head down.
Last night, A senior Tory told me: ‘The PM and Chancellor have used up a lot of goodwill. You have to remember: two-thirds of Tory MPs didn’t vote for her. It’s all very well her insisting there will be “no Uturns” and making tough talk about difficult decisions, but she doesn’t have the mandate.’
As for Truss, I’m told she is ‘hurt’ at having had to give up such a totemic tax change. As the thinktank boss Mark Littlewood said: ‘I’ve known Liz Truss for many years, and I can’t think of another time when she’s changed her mind on anything, anything at all.’
Rishi Sunak, who Truss beat for the Tory leadership, has opted to stay away from the Tory conference, along with many Tory MPs. He will now be back in Parliament, quietly working on a renewed campaign for the Tory leadership.
The debacle of the past few days will confirm his view that his frontline political career is far from over. Truss will have to work hard to win round the enemies in her own party