A senior Conservative MP has said that Liz Truss must not “nibble at the edges” but instead perform a “powerful” and “significant” U-turn with its so-far disastrous economic plan.
Mel Stride, the chair of parliament’s Treasury select committee, told the BBC’s Today programme: “My personal view is that it [a U-turn] should happen, we have reached a point where we need this very powerful and significant signal to the markets that fiscal credibility is firmly back on the table, and I think that means doing something right now and not delaying.
“Doing something very significant too – right at the heart of that will be unwinding the position on corporation tax.
“The danger here is the argument in the room lands in a place where they decide to nibble at the edges of this and I’m afraid I don’t think that will cut it, and you could end up in that circumstance in the worst of all worlds where you’ve U-turned but doesn’t settle the markets in the way we need to.”
Stride’s comments came as the chancellor, Kwasi Kwarteng, cut short a visit to Washington DC on Thursday, adding to signs that the government is preparing to announce a U-turn over its plan to scrap a rise in corporation tax, a centrepiece of its much vaunted “growth plan”. The chancellor was expected to land in London on Friday morning and head to talks with the prime minister.
Kwarteng’s so-called mini-budget, fully endorsed by Truss, sent shockwaves through the financial markets with its £45bn package of unfunded tax cuts.
Yields on gilts, UK government bonds, surged in the wake of the announcement on 23 September, a signal of a crashing investor confidence in the UK’s fiscal credibility.
Both bonds and the pound steadied at the start of London trading on Friday as the Bank of England’s bond-buying programme comes to a close with yields on UK 30-year gilts falling back by 1.6% to 4.47%, and the pound rising 0.3% higher at 1.127 against the US dollar – in a sign trading sentiment is improving.
Stride said he hoped the chancellor was flying home from the US early to have conversations with the prime minister and row back on tax cuts announced in the mini-budget.
He told the BBC Radio 4 programme: “Well it could well be that a U-turn is about to happen and of course he will want to be in the room discussing that if that is about to happen.”
Speaking later on BBC Breakfast, Stride said his advice to Kwarteng, over rowing back on tax cuts was: “Do it now.”
The comments come after Kwarteng insisted he was “not going anywhere” and he would publish his medium-term fiscal plan on 31 October with assessments from the independent Office for Budget Responsibility (OBR).
The trade minister, Greg Hands, who backed Truss’s rival Rishi Sunak in the Tory leadership contest, was on media rounds defending the government’s record and denying reports that MPs were plotting to remove Truss.
Hands said he does not recognise reports that senior Tories are plotting the possibility of replacing Truss with a joint ticket of Sunak and Penny Mordaunt.
The trade minister told Sky News: “I was a supporter of Rishi Sunak; somehow I’d be very surprised at that story.
“I was talking only yesterday with Penny Mordaunt. I don’t recognise that story at all.”
Hands, who was a prominent backer of Sunak, was asked if the markets would have more confidence if Sunak was in No 10.
He said: “Rishi Sunak did not win the leadership contest, Liz Truss did win the leadership contest. I am dealing with the situation that we are in.”
Hands said “let’s wait and see” when asked if there would be any more U-turns on the mini-budget.
He told Sky News: “Let’s wait and see. You won’t have long to wait for 31 October for the chancellor to lay out those plans. I do say that the prime minister and the chancellor are absolutely resolute, determined.”
