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Evening Standard
Evening Standard
World
Nicholas Cecil,Rachael Burford,Jonathan Prynn and David Bond

Liz Truss faces calls for another U-turn to end economic mayhem

Liz Truss came under growing pressure on Thursday to tear up more of the mini-budget to quell market turmoil or risk a major revolt by Tory MPs.

Senior Conservative MPs said that Kwasi Kwarteng’s new fiscal statement in just 18 days’ time was now absolutely crucial. The Chancellor was facing calls to take a scalpel to his mini-budget of September 23 to end the economic mayhem it had sparked.

Amid a febrile atmosphere at Westminster, Cabinet minister James Cleverly repeatedly refused to rule out another U-turn, this time over Mr Kwarteng’s decision to ditch the previously planned increase in corporation tax from 19p to 25p next April.

He also told rebel MPs not to seek to topple Ms Truss, a warning believed to be unprecedented given the Prime Minister has only been in No10 for 38 days.

The Bank of England’s emergency intervention, to ensure financial stability in Britain by stopping the rout in the gilts markets, ends on Friday.

The gilts markets were calmer on Thursday, with yield on the 30-year gilt down 20 basis points at 4.619 per cent, while the 10-year gilt was yielding 4.245 per cent, down around 15 basis points. The focus of MPs, though, was on how Mr Kwarteng will restore confidence in the public finances, especially after Ms Truss ruled out public spending reductions.

Gloucester MP Richard Graham said: “Getting the 31st of October right is more important than ever. The Government can’t afford to disappoint the markets. We need to restore a clear perception of economic competence.”

Basildon and Billericay MP John Baron said decoupling the rise in benefits with inflation was not “compassionate Conservatism” and the “messaging… need to improve”. He added: “There is time to turn things around but no time to waste.”

Privately, other Tory MPs were more despairing.

One former Cabinet minister said Mr Kwarteng’s fiscal statement had to show the Conservative parliamentary party and the markets that the Government had a credible economic strategy.

“If on October 31, these conditions are not satisfied, Kwasi will have to go,” he said. “What happens to Liz at that point will be up to the parliamentary party.”

With the latest poll putting the Tories 29 points behind Labour, another senior Tory MP added: “If she is going to save her own skin, she is going to have to make him her sacrificial lamb.”

Foreign Secretary Mr Cleverly warned MPs against moving against the PM.

He told BBC Radio 4’s Today programme: “We have got to recognise that we do need to bring certainty to the markets. I think changing the leadership would be a disastrously bad idea politically and also economically.”

During a morning media round, he repeatedly stopped short of ruling out another U-turn, this time on corporation tax.

His comments came amid a report in The Times that Ms Truss has been told by her top advisers to abandon more key elements in the mini-budget and raise corporation tax to show the Government has control of public finances.

The editor of the ConservativeHome website, former MP Paul Goodman, predicted there could be a “withdrawal of most of the mini-Budget” and suggested Mr Kwarteng may be sacked.

He said: “Perhaps the income tax cut would survive. The national insurance one is in place. But the corporation tax reduction would go. So might the stamp duty cut — and of course the end of the cap on bankers’ bonuses.”

Mr Kwarteng has already been forced to ditch his plan to axe the 45p top rate of tax.

Some Tory MPs are firmly backing Ms Truss, including former Tory leader Iain Duncan Smith and fellow veteran MP Sir Christopher Chope. Sir Christopher told Times Radio: “If you are talking to people who never supported Liz Truss… it’s time they shut up and allowed those who want to ensure that our country is able to break free of the anti-growth coalition can do just that.”

But at a fraught meeting of the 1922 Committee of backbench Tory MPs on Wednesday night, Commons education committee chairman Robert Halfon told Ms Truss she had “trashed the last 10 years of workers’ Conservatism”.

Ms Truss told the group that small businesses would have faced “devastation” if the Government had not acted to cap energy prices, according to aides.

Meanwhile, Conservative MP Mel Stride, chairman of the Commons Treasury Committee, said that given Ms Truss’s commitments to protect public spending, there was a question over whether any plan that did not include “at least some element of further row back” on the £43 billion tax-cutting package can reassure investors.

Former Cabinet minister David Davis called the mini-budget a “maxi-shambles” and suggested reversing some of the tax cuts would allow Ms Truss and Mr Kwarteng to avert leadership challenges for at least a few months.

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