Liz Truss’s hopes of long-term survival as prime minister have been dealt a massive blow by a bombshell series of polls, giving Labour leads of up to 33 points and showing support for the Tories melting away after her “kamikaze” mini-Budget of tax giveaways for the rich.
The prime minister emerged from five days of silence on Thursday to deliver a defiant defence of the £45bn package, which she insisted was “the right plan” even while admitting it handed “disproportionate” cash gains to the wealthiest in society.
But independent experts described the package unveiled by chancellor Kwasi Kwarteng last Friday as the biggest “unforced error” of modern economic history, warning it will usher in a new age of austerity, with the government needing to find almost £50bn a year in cuts to public spending to meet its own targets.
The new YouGov poll, conducted on Wednesday and Thursday after the Budget came under fire from the IMF and the Bank of England was forced to intervene to shore up pension funds, put Keir Starmer’s Labour up nine points since the weekend on 54 per cent and Tories down seven on 21 per cent.
A separate Survation survey had Starmer’s party 21 points clear on 49 per cent to the Tories’ 28. Deltapoll recorded a 19-point margin, with Labour on 48 per cent to the Tories’ 29. And Redfield and Wilton had a 17-point gap between Labour on 46 and Conservatives 29 per cent.
Any would deliver a landslide victory for Labour, potentially outstripping Tony Blair’s historic triumph in 1997.
The findings set a torrid backdrop for the opening of the Tory annual conference in Birmingham on Sunday, at which the PM and chancellor were already expected to face calls for their removal.
Meanwhile, pressure is growing on Mr Kwarteng to bring forward a planned 23 November statement setting out how he plans to balance the books over the medium term, after the Office for Budget Responsibility fiscal watchdog revealed it will hand its initial forecast of the impact of his package to the chancellor as early as 7 October.
The chair of the Commons Treasury committee, Tory former minister Mel Stride, called on Mr Kwarteng to publish the forecast “as soon as possible” and to move his statement before the Bank of England’s crucial rate-setting meeting on 3 November, when it is expected to increase interest rates by as much as a whole percentage point.
Mr Stride told the chancellor in a letter that his refusal to allow the OBR to publish its analysis alongside his 23 September Budget had “driven the lack of confidence in the markets”, which has seen the pound plunge and gilt yields rise sharply over recent days. He also said that Mr Kwarteng’s comments about the decision “only add to the sense of the avoidance of scrutiny”.
Former Tory chancellor Ken Clarke told The Independent that Mr Kwarteng should announce his plan within the next “two or three weeks”.
“It would restore some confidence if he could do it quicker, because we’re in a very brittle state of affairs,” said Lord Clarke. “We can’t wait until the end of November.”
The Tory peer, who served in the Thatcher and Major governments, added: “What we’ve seen is unprecedented – I can’t remember any chancellor causing such alarm in the markets and forcing the Bank of England to spend billions to save pensions.”
Former minister George Freeman called for an emergency meeting of the cabinet to draw up a “plan B”.
“This is now a serious crisis with a lot at stake, a time for cool heads and calm leadership,” said Mr Freeman. “The economic package of borrowing and tax cuts announced last week clearly can’t command market or voter confidence. The cabinet must meet fast to agree with PM and chancellor a plan B which can hold.”
Experts at the Resolution Foundation thinktank said that if Ms Truss refuses to U-turn, she will need to impose spending cuts “broadly the same or bigger” than George Osborne did after the banking crash, with fiscal tightening of £37bn-£47bn a year required to meet the commitment to get debt reduction by 2026-27.
The market turmoil, which has seen traders dumping government bonds, has increased the UK’s debt interest costs by around £12.5bn a year, the think tank warned.
Ms Truss confirmed on Thursday that she and her ministers are now looking for cuts across government – declaring that there are “plenty of areas” where taxpayers’ money could be saved.
“There are always ways that we can organise things more efficiently. What I want to make sure is that taxpayer money is focused on frontline services,” the prime minister told broadcasters.
Resolution Foundation chief executive Torsten Bell said the huge package of tax cuts “without any explanation of how they would be paid for” was the “biggest unforced economic policy error of my lifetime”.
Warning of “unpleasant” cuts ahead, he added: “The intention may have been to emulate Margaret Thatcher – but the reality may involve looking a lot like George Osborne in the years ahead.”
“Painful” policy choices that the Treasury would now have to consider include cutting public investment projects and abandoning the pledge to increase defence spending to 3 per cent of GDP by 2030.
The think tank said the government could consider uprating benefits and pensions by earnings instead of inflation – a 4 per cent real-terms cut. This would save £20bn over two years, but would cost a typical low-income family with two children over £1,000 a year.
Charities warned that U-turning on the commitment would lead to disabled people “starving and freezing in their own homes”.
The Child Poverty Action Group said: “Unless benefits are uprated to match inflation, [children] will also become the casualties of a collapsing economy.”
In a series of interviews with BBC local radio and TV stations, the prime minister dismissed calls to calm the situation by reversing some of Mr Kwarteng’s measures or raising funds from a windfall tax on energy companies.
She repeatedly tried to blame Vladimir Putin’s invasion of Ukraine for the mayhem of the past few days. And she claimed that the “biggest part” of the chancellor’s package was support for energy bills, valued at £60bn over the first six months, which was announced in a separate statement two weeks earlier without sowing panic in the markets.
But BBC Radio Bristol presenter James Hanson retorted: “This isn’t just about Putin. Your chancellor on Friday opened up the stable door and spooked the horses so much you can almost see the economy being dragged behind them.”
And Look North Hull political editor Tim Iredale put it to her that she seemed to be saying – as Jim Callaghan was accused of doing at the time of the IMF bailout of 1976 – “Crisis, what crisis?”
Defending tax cuts, the PM said: “We cannot tax our way to growth. We had the highest tax rates in this country for 70 years across the board, we’ve reduced those taxes across the board.
“And of course people who are better off tend to pay more taxes, so there’s a disproportionate effect there.”
Independent economists calculate that almost half of the £45bn package will go to the top 5 per cent of earners, with anyone earning less than £155,000 paying more overall as a result of tax changes during this parliament.
Despite Tory MPs branding her package “inept madness” and a “disaster”, Ms Truss insisted: “This is the right plan that we’ve set out … It’s important that we’re taking steps to improve growth levels in our economy because if we don’t, we’re not going to get the high-wage jobs, we’re not going to get the opportunities, we’re not going to get the investment that we need to see in our country.”
She rejected demands for part of the cost of energy support to be funded in part by a windfall tax on the estimated £170bn in excess profits taken in by energy giants, denouncing it as an “arbitrary” levy that would deter investment in the UK.
Shadow chancellor Rachel Reeves said the PM’s intervention had “made this disastrous situation even worse”, accusing Ms Truss of “prioritising saving her face over saving people’s homes”.
Boris Johnson’s former chief adviser Dominic Cummings said: “Truss is in a flat spin and won’t recover. The only thing going for her is she doesn’t have to face someone like Obama or Bill Clinton. But Truss is so bad even dud Starmer can win if he avoids Truss-ERG style disasters.”
