Tuesday, December 6, 2022

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Because of economic plans, the pressure on Truss and Kwarteng is increasing

Top Tories have put pressure on Liz Truss and Kwasi Kwarteng over welfare and their economic plans, which have also come under renewed fire from the International Monetary Fund (IMF).

When Parliament returned on Tuesday, the Chancellor was warned that trying to pass the policy without the support of Conservative MPs would further damage the government’s economic credibility.

At the dispatch box, senior Tory Mel Stride warned Mr Kwarteng to reach out to Members across the House of Commons to be “absolutely sure” he can approve the measures or “unnerve the markets”.

Former Cabinet Secretary Julian Smith also told him the government must not offset forthcoming tax cuts “on the backs of the poorest people in our country”.

The dire warnings during a Treasury Questions session revealed the lingering deep fissures in the Tory party, sparked by Mr Kwarteng’s mini-budget and the government’s refusal to rule out a real-world pay cut for beneficiaries.

A decision on whether benefits will increase in line with inflation or income will be announced by Mr Kwarteng during his medium-term financial plan on October 31, has been confirmed.

The finance strategy will set out how the government plans to cut debt-to-national income in the wake of the £43bn mini-budget tax gift and commitment to cap energy bills for the next two years.

The Chancellor will have to find more than £60bn in spending cuts to get public finances back under control if he doesn’t repeal the tax cuts, the leading economic think tank, the Institute for Fiscal Studies (IFS), has warned.

In response, Downing Street said Ms Truss was still opposed to austerity.

Asked if she stood by her predecessor Boris Johnson’s pledge that there would be no back to austerity, the Prime Minister’s official spokesman said: “Yes.”

He continued, “These are challenging times and we have made significant interventions, costing many billions, to provide the support needed to protect people from these global challenges.

“Of course that will require some spending decisions, but it will be the Chancellor who comes forward to set those.”

No. 10 also defended the government’s tax cut agenda, despite the IMF’s suggestion that this has complicated the Bank of England’s fight to contain inflation.

“I think the Government is taking policies to support the British people at a time of high prices around the world.

“That’s why we think it’s right to step back from the highest tax burden in 70 years and ensure the public gets to keep all the money they make,” Ms Truss’ spokesman said.

The Washington-based organization said the UK is on track for a significant slowdown in growth from 3.6% this year to 0.3% in 2023.

The Prime Minister’s spokesman said the “forecasts were prepared before the announcement of the growth plan and the energy price guarantee”, citing the IMF’s suggestion that the government’s fiscal measures are expected to boost growth in the near future.

Ms Truss and Mr Kwarteng remain “committed” to the growth measures outlined in the Chancellor’s mini-budget, despite the ensuing market turmoil that forced the Bank of England to intervene again, the official said.

“The Prime Minister remains confident that the measures outlined will lead to growth in the economy.

“The Chancellor has set out our position on taxes and on reducing the tax burden,” he added, saying the government’s position “has not changed”.

But they are under mounting pressure to reverse course, having already been forced to scrap plans to scrap the top 45p tax rate.

The central bank’s latest emergency intervention to calm markets scared by the mini-budget was not discussed in Cabinet on Tuesday, Ms Truss’s spokesman said.

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