Liz Truss is struggling to persuade Conservative MPs to back her controversial mini-budget, with some even threatening all-out rebellion amid fears that they will once again become known as the “nasty party”.
The prime minister faces a rising drumbeat of discontent that is overshadowing the Tory conference after she insisted she would “stand by” her plans to cut the top rate of income tax and ram through public spending cuts.
Michael Gove launched a dramatic broadside at Truss’s economic plans, saying it was “not Conservative” to fund tax cuts from borrowing or trimming the welfare budget and warning that she had to change course or risk her mini-budget being voted down.
However, Kwasi Kwarteng, the chancellor, will on Monday pledge to “stay the course” with a “sound, credible” plan that he will insist is “backed by an iron-clad commitment” to fiscal discipline despite the economic turbulence unleashed by his mini-budget.
Truss offered a sliver of remorse for the way the mini-budget was received after it led to a temporary collapse in the pound, a rebuke from the International Monetary Fund and warnings that interest rates could be raised again.
The prime minister sought to quell fury over her handling of the economy but then firmly reaffirmed her tax plans and refused to rule out public spending cuts and a real-terms drop in benefits to pay for them.
She told the BBC’s Sunday with Laura Kuenssberg programme: “I do accept we should have laid the ground better, I do accept that and I have learned from that and I will make sure that in future we do a better job of laying the ground.”
But she added: “I do think there has been too much focus in politics about the optics or how things look – as opposed to the impact they have on our economy.”
“I believe in getting value for money for the taxpayer,” she said, promising that “excellent public services” would remain but with a warning that it would be a “difficult and stormy” winter.
After less than a month in office, Truss has faced criticism from many in her own party over measures including scrapping the cap on bankers’ bonuses and axing the 45p tax rate in a bid to push for growth, and has been hammered in the polls.
On Sunday night as she made a surprise appearance at a Tory conference party, winning applause at the Conservative Home event after saying she had made a “package of tax cuts and supply side reforms to turbo charge our economy”.
But Tory insiders admitted concerns that the conference hall could be half-empty for her speech on Wednesday, with delegates leaving early because of the train strike, so WhatsApp messages have been sent to local Tory chairs asking them to encourage members to stay.
As a large crowd of protesters gathered outside the Birmingham conference, one senior Tory admitted that the “nasty party” – the label Theresa May applied to the Conservatives in 2002 – was back. “Nobody is saying those words, but it’s basically what everybody is thinking when they look at what we’re proposing,” they said.
Cabinet minister Robert Buckland hinted at his unease about the tax cuts disproportionately benefiting the wealthy, saying that while simplifying tax bands was sensible, he wanted to see “intelligent interventionism” instead of “trickle-down economics”.
The Wales secretary told a fringe event: “A sensible Conservative government must be very careful to make sure that at the other end of the equation, those in greatest need are not left behind.
“We must remember that it is those who are in genuine need who will also need our help as a government. We have to not shirk our responsibilities in that respect, even if it does mean that for the time being there has to be greater expenditure.”
Senior Tory MP Damian Green warned the party would lose the next election if it didn’t change. “It’s a political no-brainer that if we end up painting ourselves as the party of the rich and the party of the already successful then, funnily enough, most people won’t vote for us and we lose,” he said.
Indicating that he hoped there would be a rethink, the former cabinet minister added: “Very clearly, there are conversations that need to be had over the direction of government as we move between now and the general election.”
Former transport secretary Grant Shapps also criticised the measures, saying the move to scrap the 45p tax rate was “tin-eared”. In an article for the Times, he wrote the government should not be “making big giveaways to those that need them least”, adding: “When pain is around, pain must be shared”.
Jake Berry, the Tory party chair, sparked anger among colleagues when he said MPs would be expected to back the tax measures or would no longer be allowed to sit as Conservatives, with at least 14 publicly expressing concern and warnings that the comments risked “breaking the dam” and forcing more out into the open.
Rebel MPs will not get an opportunity to test support for the controversial measures for many months. No 10 is now understood to be planning a vote on the tax cuts in March, likely after a spring Budget. The only immediate legislation needed is on stamp duty and abolishing the national insurance rise, which Tory MPs will back.
However, in a frantic day of interventions on Sunday, Michael Gove said he supported moves to limit energy bills, but the fact that 35% of additional borrowing in the fiscal statement went on unfunded tax cuts left him “profoundly” concerned.
“There are two major things that are problematic with the fiscal event,” he said. “The first is the sheer risk of using borrowed money to fund tax cuts. That is not Conservative. The second thing is the decision to cut the 45p rate, and indeed at the same time to change the law on how bankers are paid in the City of London.
“Ultimately, at a time when people are suffering … when you have additional billions of pounds in play, to have a principal decision, the headline tax move, cutting tax for the wealthiest, that is a display of the wrong values.”
Pressed on whether he would vote against the package in the Commons, he eventually admitted: “I don’t believe it’s right.” At a fringe event later, he added: “If a mistake has been made, then I think the right thing to do is to acknowledge that, and to correct course.”
In his speech to Tory conference on Monday, Kwarteng, who it was revealed attended a private champagne reception with financiers after delivering his mini-budget, will say: “We must face up to the facts that for too long our economy has not grown enough. The path ahead of us was one of slow, managed decline.
“We needed a new approach, focused on raising economic growth. That is the only real way to deliver higher wages, more jobs, and crucially, revenue to fund our precious public services and it is the only way to achieve long-term fiscal sustainability … I am confident our plan is the right one.”
