Liz Truss was under fire from senior Tories last night for pouncing on tax cuts.
Her shock decision to abandon plans to scrap the top income tax left supporters worried about her willingness to pursue the rest of her radical programme.
The Prime Minister’s critics, including Michael Gove, seized on the rise above the 45p rate and immediately began targeting other parts of her agenda, such as capping a rise in benefit payments.
“Her position is such that she really cannot afford to make any more mistakes,” said a former minister who supported her leadership. ‘She’s pretty much used up all nine of her lives in one fell swoop.’
Liz Truss was under fire from senior Tories last night for pouncing on tax cuts
A Cabinet source also expressed concern, saying: ‘The problem with U-turns is that every time you do one, you get weaker.
“Boris had too many U-turns, Theresa had way too many. We’re trying to do some very difficult things and we can’t afford many more.’
Kwasi Kwarteng formally dropped the plan to scrap the 45p rate – paid by workers on more than £150,000 – yesterday morning, less than 24 hours after the Prime Minister insisted she was ‘absolutely committed’ to it.
The chancellor took responsibility for the change of direction and said ministers had “got it wrong”. He added: ‘I’m listening and I understand and in a spirit of contrition and humility I’ve said “actually it doesn’t make sense, we’re not going to go ahead with the abolition of the rate”.’
Kwasi Kwarteng formally dropped plans to scrap the 45p rate – paid by workers on more than £150,000 – yesterday morning, less than 24 hours after the Prime Minister insisted she was ‘absolutely committed’ to it
Miss Truss said yesterday that the issue had become ‘a distraction from our mission to get Britain moving’.
In an LBC interview to be broadcast this morning, the Prime Minister was asked six times to rule out further U-turns but would only say: ‘I am determined to continue 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 expressed concern that it was 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 about anything, anything.’
In an LBC interview to be broadcast this morning, the Prime Minister was asked six times to rule out further U-turns but would only say: ‘I am determined to continue 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 braced for another clash with critics over plans to squeeze £7 billion from the benefits bill by raising payments in line with earnings rather than inflation;
Sir. Kwarteng offered a further concession to critics by revealing that his plans to reduce the national debt will now be accelerated;
Two polls put Labor 25 and 28 points ahead of the Tories just a month after Miss Truss took charge;
A shootout broke out over who first suggested scrapping the 45p rate;
The pound rose above the level it was trading at before the emergency budget triggered a fall;
Home Secretary Suella Braverman revealed plans to crack down on the number of foreign students allowed into the UK;
Former minister Nadine Dorries warned the prime minister might have to call an election if she strayed further from Boris Johnson’s agenda;
Business Minister 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 Prime Minister and the Chancellor that they were behind the cut. Miss Truss is understood to be frustrated at having to back down, telling colleagues it ‘hurts’ 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 keynote conference speech in Birmingham tomorrow to insist her vision of lower taxes and less red tape is the only way to tackle anemic economic growth.
Speaking yesterday, the chancellor admitted it had been a ‘tough’ day but added: ‘We cannot sit idly by. What Britain needs more than ever is economic growth and the Government is fully committed to economic growth.
‘That is why we will strike a new economic deal for Britain backed by an iron-clad commitment to fiscal discipline.’
A senior Conservative source said on Sunday night the prime minister and chancellor had decided the row over the 45p tax rate was diverting too much attention from the budget’s “core package” of help for 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 they and other Tory MPs were willing to join Labor to defeat the plan in the House of Commons. Gove said the plan to cut tax for people earning more than £150,000 a year was a “display of the wrong values”. Sir. Shapps said the “political eye-ear” move had “managed to alienate almost everyone”.
But Paul Johnson, director of the Institute for Fiscal Studies, predicted more U-turns were likely. He said not scrapping the 45p tax, a policy that would have cost £2 billion a year, was just a “rounding error in public finances”.
With around £43bn of unfunded tax relief remaining, Mr Johnson warned: ‘The Chancellor still has a lot of work to do if he is to show a credible commitment to fiscal sustainability.
‘Unless he also backfires on some of his other, much bigger tax announcements, he has no option but to consider cuts in public spending: for social security, investment projects or public services.’