Truss mulls another tax cut U-turn after bruising day for PM
Rumours that Liz Truss could U-turn on her tax cut plans intensified yesterday, with the Chancellor telling journalists “let’s see” when asked about the possibility of a change of course.
Number 10 held crisis talks over whether to scrap more of the mini-budget as speculation over the Prime Minister’s future reached fever pitch in Westminster.
Many in Westminster believe Truss will U-turn and stick to previous government plans to increase Corporation Tax for the country’s most profitable firms in a bid to calm financial markets worried about the UK’s increased debt pile.
Cabinet ministers just last week indicated spending cuts were coming to balance the Budget, however the scale of cuts required is not believed to politically possible.
Kwarteng told the BBC yesterday he was “totally focussed on delivering the growth plan” and that “our position hasn’t changed”, but offered his “let’s see” comments in an interview with the Telegraph later in the day.
When asked whether he and Truss would still be in office next month, Kwarteng said: “Absolutely, 100 per cent. I’m not going anywhere.”
Talk of a U-turn comes as the City is sweating over a possible market flare up after the Bank of England today winds down its £65bn gilt market support scheme.
Gilt yields fell sharply yesterday on expectations of an imminent trimming of the mini-budget.
Rates on the 30-year gilt – which have suffered the sharpest sell off amid the market chaos – fell more than 40 basis points to around 4.5 per cent. Yields and prices move inversely.
The pound strengthened over two per cent against the US dollar to its pre mini-budget level.
Kristalina Georgieva, the IMF’s chief, stressed Kwarteng’s plans should not “undermine” the Bank of England’s efforts to tame inflation.
Tory MPs have begun to sharpen their knives for Truss, just 39 days into her premiership.
Ex-cabinet minister Julian Smith tweeted a cryptic message yesterday, which suggested he had already submitted a letter of no-confidence.
Former veterans minister and Boris Johnson ally Johnny Mercer said he had received “dozens” of distressed emails from constituents worried about increases in their mortgages.
Two-year mortgage rates are now up to 6 per cent – a 14-year-high – on the back of the government’s mini-Budget.
“I want you to know that I get it, that most of us get it, and that we will do all we can to change it,” Mercer said.
“Heartbreaking. Unconscionable. Politically unsurvivable. I got into politics to help people like this. Will not stand and watch it burn.”
One minister told CityAM there was “real discontent” among MPs, but that “we do need to just get on with the job now and let Liz govern”.