Liz Truss is under pressure from top Tories over screeching late-night reversal on tax policy amid threat of new revolt on benefits… but defiant Prime Minister refuses to rule out more U-turns
- Liz Truss was under fire from senior Tories last night for caving in over tax cuts
- Critics, including Michael Gove, seized on the climbdown over the 45p rate
- Other parts of agenda, such as capping a rise in benefit payments, also targeted
- ‘Her position is such that she really can’t afford to make any more mistakes’
Liz Truss was under fire from senior Tories last night for caving in over tax cuts.
Her shock decision to abandon plans to scrap the top rate of income tax alarmed supporters 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.’
Liz Truss was under fire from senior Tories last night for caving in over tax cuts
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.’
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.
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”.’
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
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.’
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