Politics

Truss eyes up tax U-turn in desperate bid to restore market confidence

Kwasi Kwarteng grilled by host on mini budget u-turn

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The Prime Minister wants to stick with the mini-budget but is “committed” to making sure the “numbers add up” when more details are laid out in 17 days time.

Tory rebels are warning another backlash from the markets will put her premiership under serious threat. But senior figures in the party called for calm and said an attempt to oust her would be “disastrous” for the party and the country.

Ms Truss is talking constantly to Chancellor Kwasi Kwarteng about whether the growth plan needs to be changed.

Insiders insist no decision has yet been made but acknowledge that a lot has happened in the three weeks since the tax-cutting package was announced and the aim is to make things as settled as possible.

The PM and Chancellor are looking at the market reaction and will take into account the changes in the situation to see if it all still stacks up. Mr Kwarteng last night indicated that his decision to overturn a planned rise in corporation tax next year to 25 percent could now be reversed.

During a visit to the International Monetary Fund’s annual meeting in Washington, he said he wanted to make sure the levy remained “competitive” but did not rule out increasing the current 19 percent rate.

When pressed on whether he was planning a u-turn, Mr Kwarteng said: “Let’s see.” The Chancellor insisted “our position hasn’t changed” on the growth plan and he will set out details of his strategy to cut debt in the medium-term on October 31.

Asked if both he and Ms Truss would still be in office in a month, Mr Kwarteng said: “Absolutely 100 per cent. I am not going anywhere.”

The Chancellor admitted the UK suffered some “turbulence” following his mini-budget but said the economy was facing the same problems as other countries around the world.

“What I am going to acknowledge is the fact that it is a very dicey situation globally,” he said.

Ms Truss and Mr Kwarteng will continue to hold discussions when he returns from the US today. The Prime Minister intends to protect as much of the growth plan as possible. 

A No 10 source said: “She’s first and foremost committed to making sure the numbers add up on October 31 but wants to do so in line with her philosophy of lower taxes and tight control of public spending. 

“There’s a process to go through and it is still not clear what the package will look like, but we’ll get there. Liz wants to keep the mini budget intact if she absolutely can. It is choppy at the moment. We’ll get debt falling. Trust us to manage the national finances.”

Senior Tories rallied around the PM and warned rebels in the party that any attempt to move against her would be deeply damaging.

Party chairman Jake Berry told the Express it was time for MPs to unite behind our Prime Minister and “end the sniping and the plotting for the good of our party and our country”.

Foreign Secretary James Cleverly said: “I think changing the leadership would be a disastrously bad idea politically and also economically.” 

Rumours circulated around Westminster that plotters want to oust Ms Truss and replace her with rivals Rishi Sunak and Penny Mordaunt on a joint ticket.

Former Tory chancellor Lord Lamont said it would be “farcical” for Tory MPs to move against the PM so soon and it was time to “calm down”.

Another former Cabinet minister said that some MPs were becoming “hysterical” and needed to allow the situation to settle down.

Former home secretary Priti Patel suggested the government could be forced into a further U-turn over the mini-budget. She said that “market forces will probably dictate some of these changes now”.

“The market is going to dictate this, primarily because we want to see stability. Stability is absolutely crucial, for everyone to carry on living their lives, for the institutions to function, but actually for the British people to have the stability that they need in their lives as well.

“And by that, as well, I mean mortgages, interest rates and all those crucial, crucial levers.”

Senior Conservative Alicia Kearns, suggested parts of the tax cutting plan should be dropped.

“Do I think we should be borrowing en masse where our children have to pay this back for decades to come? No, I don’t,” she said.

“We all want Liz Truss to succeed in that the country needs her to succeed. And it is about recognising that actually, sometimes baby steps can result in more meaningful and embraced change than perhaps a bonfire.”

But Professor Patrick Minford, an economist who has heavily influenced Ms Truss, said it would be “insane” to rip up the mini-budget.

“It’s really important we don’t do something really stupid at this point. Liz Truss’s policies for growth are absolutely right and to be thrown off them by a bit of market turbulence is insane.”

He argued against U-turns, saying the Bank of England “needs to be much more active in its policies of intervention in the gilts market”.

Asked if he had predicted the market turmoil triggered by the mini-budget, the economist said: “Obviously, at the moment, the markets are facing enormous turbulence because of worldwide tightening of money, and so there’s a great deal of nervousness about.

“But I think the way to handle that is to deal with market turbulence in our gilts market directly through QE (quantitative easing) and then to keep the policies going.”

A government source said: “This government is committed to fiscal responsibility and we’ve made it clear, we’ll do what it takes to make sure taxpayers’ money is used wisely and balance the books.”

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