Liz Truss received instructions to ‘get in control’. She was also warned that the economy will be her ‘live and die’ as civil war continues between Tory MPs. But, the PM is refusing to rule out more U-turns on tax policy.
Supporters are already concerned about the shock announcement that she has abandoned plans to abolish the highest income tax rate, and her resolve to continue her radical program.
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.
This comes at a time when Sir Graham Brady, chairman of the 1922 Committee, is believed to have warned Ms Truss that her plans to cut taxes through Parliament were not supported by enough people despite having a majority of 71 seats.
‘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.’
Priti Patel, former Home Secretary, has warned Ms Truss about her unfunded tax cuts. She said Tories would ‘live and die’ based on their economic credibility.
Today, she will accuse Mr Kwarteng and the PM of “spending today without any thought for tomorrow”.
Ms. Patel also plans to call Ms. Truss on setting a “ceiling” on spending in public sectors, as well as adding that there’s a limit on the ‘amount we can afford”, The Times reports.
She’ll say, “We spend today without thinking about tomorrow. And like the Blob from the horror movie, the larger the problem, the more it takes up today and the greater the resources that are needed to solve it 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 our party to regain its credibility through its renewed commitment to sustainable public expenditure, which can be affordable for today and tomorrow.
The move comes as former Cabinet ministers Mel Stride (Grant Shapps), Julian Smith, Julian Smith, and Damian Green, all of whom had previously voiced their opposition to Ms Truss’s budget.
Last night, senior Tories were critical of Liz Truss’s apathy 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
Ms Truss and her party are also fighting over real-terms reductions of benefits.
It is believed that she will consider increasing Universal Credit to keep up with inflation after yesterday’s elimination of the top tax rate at 45p.
According to The Telegraph, Ms Truss prefers a lower measure, like the increase in average earnings, which encourages people who receive benefits into work.
This has led to growing discontent at the top of party. Some Cabinet ministers believe refusing to raise benefits to inflation is a non-starter.
Ms Truss, however, will question whether it’s fair to raise benefits while workers suffer real-terms wage cuts.
With Ms Truss, Mr Kwarteng and already being forced to make two humiliating U-turns on welfare issues, the Tory civil War may still be centered around their differing opinions.
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”.’
Ms 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 have to worry about it when you do 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’
These warnings arrived 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;
- Kwarteng made a concession to his critics, revealing that his plans for decreasing government debt would now be swiftly tracked;
- Just a month after Miss Truss assumed control, two opinion polls showed Labour at 25 and 28 percent ahead of the Tories.
- The 45p rate was first eliminated. This sparked a ruckus.
- The British Pound surged beyond the levels it traded at prior to the budget crisis that triggered a slump.
- Suella Braverman, Home Secretary of the UK, announced plans to reduce the number foreign students permitted 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;
- Jacob Rees Mogg (Business Secretary) revealed that decision-making on whether or not to allow fracking will not go 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.
It is reported that she also finds it difficult to understand why many Conservative MPs have publicly opposed a tax cut.
Tomorrow, she will give her keynote speech at Birmingham’s main conference to stress that lower taxes and fewer red tape are the best way to combat anaemic growth.
In his address yesterday, the Chancellor acknowledged it had been a ‘tough’ day but added: ‘We can’t sit idly by. The Government is fully committed to economic growth, and Britain is in dire need of it more than ever.
‘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.
The rebellion was led by Michael Gove, former cabinet ministers and Grant Shapps. They warned other Tory MPs that they were prepared to work with Labour in order to stop the House of Commons plan. 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’.
Paul Johnson, Director of the Institute for Fiscal Studies predicted more U-turns. 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.’
Andrew PIERCE reports about a dramatizing day at the Tory party conference.
Andrew Pierce is the Daily Mail’s Editor
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.
However, there are already indications that the policy may be in jeopardy.
Kwarteng, in reality, was 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. These measures would benefit ordinary citizens, 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.
Backbenchers in large numbers were strongly against this policy and planned to vote with the Opposition, or simply abstain.
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’s news, the mini Budget might be brought forward for this month.
Shapps himself – who called the scheme ‘an unforced error that is harming the Government’s economic credibility’
Many senior Tories were outraged by the 45p tax cut on Sunday, calling it a Labour gift. 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 horrified that Truss was blaming Kwarteng to explain the controversial 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. We will have a difficult time in our constituencies as well as on social media if we support it. 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. After apologizing, he announced that he must 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’
Meeting’s purpose was clearly defined. Truss and Kwarteng both agreed that the tax plan had to go. It was too dominant.
‘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.’
The U-turn came down to a simple calculation of political power. Yes, both the Opposition as well as the BBC would profit from the Government making a Uturn on a key policy. As Nick Robinson, a Radio 4 presenter, couldn’t hide his delight on Today the next morning, as he relentlessly criticized the Chancellor in the 8.10 am interview. But leaving the tax cut in place risked undermining the government’s entire agenda.
Truss, along with her team, arrived at The Cube for a reception, which featured 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.
Truss refused to drink the wine. 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. She knew that the U-turn she was about to announce would cost her.
Truss was already performing a magnificent performance in front of the 1922 Committee by 11:15pm. She knew that the U-turn she was about to announce would cost her dearly
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. The minimum 36 Tory MPs required to defeat the government were expected to vote against.
Whips are responsible for party discipline. They had not ordered backbenchers on tax cuts to follow the whips’ orders before 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 appeared to be nervous. The phone rang unabated. It was clear to everyone present that something major was happening. Shortly before 10:30 PM, The Daily Mail received word of the Uturn. A new headline was added to the paper’s front page: Are Tories at risk of a 45p tax Uturn? The role of Gove in the rebellion was highlighted by our story.
All told, it was an unholy political mess – and a disastrous day at conference. Today, the Government attempted to limit damages. 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 mutedly and kept 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, Truss beater for the Tory leadership has decided not to attend the Tory conference. He will be joined by many Tory members. He will now quietly work on a new campaign for Tory leadership.
He will see that the recent debacle has confirmed his belief in his political future. Truss must work hard in order to overcome the opposition within her party