Tory MPs plot to avoid benefits cut after humiliating U-turns | Conservative Conference 2022

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Tory MPs are plotting to avoid a welfare cut after Liz Truss was forced to make two humiliating U-turns on plans to scrap top income tax rate and date a new mini-budget .

The Guardian understands Kwarteng will accelerate plans for a new budget statement, which is expected to focus on spending and deregulation. It will now take place later this month, rather than November 23 as scheduled, accompanied by new forecasts from the Office of Budget Responsibility, in another move aimed at restoring market stability.

Senior MPs warned of further rebellion against public spending cuts, particularly on social benefits, which the chancellor refused to rule out.

The threat came as the Institute for Fiscal Studies (IFS) and the Resolution Foundation said deep cuts in public spending would be needed unless there were further U-turns on the policies announced in the mini -budget last month.

In a short, nonplussed speech at the Tory conference, Kwarteng admitted it had been a “difficult” day – hours after forgoing the tax cut for high earners. He said his economic plan had caused “a bit of turbulence”.

‘A bit of turbulence’: Kwasi Kwarteng reflects on growth plan progress – video

Kwarteng said the government was committed to its radical agenda – and would soon deregulate sectors such as childcare, agriculture, immigration, planning and financial services.

But he also said the government would take fiscal discipline seriously, saying it was “absolutely committed to being serious stewards of the public purse”.

Truss and Kwarteng decided to scrap the 45% tax rate cut the day before the conference when the scale of the MPs’ rebellion made it clear that it would not survive a parliamentary vote – along with many others tough battles ahead.

All along Truss and Kwarteng defended tax cut plans before U-turn – video

Cabinet ministers have said they believe it was the right decision. “I think we’ve come into contact with the inevitable,” one concluded.

Another said there was a clear need to return to a more rigorous system of cabinet discussions and accountability, and hinted that a reshuffle of No 10 was in the works.

“We haven’t had real cabinet government since the days of Margaret Thatcher. This must change.

But the two MPs echoed economists in warning that reversing the abolition of the top rate of income tax would make little difference to the state of public finances and expressed concern over the cuts expenses that should be announced.

Mel Stride, chairman of the Treasury Select Committee, said significant issues remained, although the U-turn was welcome. “There may still be other requirements to dismantle some of these positions,” he said.

The Resolution Foundation said that despite Monday’s U-turn, the wealthiest households would still earn nearly 40 times more than the poorest families thanks to the policies announced in the mini-budget.

“Unless further U-turns are made, the Chancellor will have to announce major spending cuts on November 23. The magnitude of these spending cuts is largely unchanged by today’s U-turn,” the think tank said before the date for the budget statement was brought forward.

Paul Johnson, the director of the IFS, said a significant cut in spending would still be needed to balance the books. “Unless he also reverses some of his other much larger tax announcements, he will have no choice but to consider public spending cuts – in social security, investment projects or utilities,” Johnson said.

One measure Kwarteng was said to be considering is to increase benefits based solely on wage growth, rather than inflation. It would mean a real reduction in income for some of the poorest in society and save around £5billion. High-level government sources said the option was under consideration, but Truss had yet to appeal.

Treasury Chief Secretary Chris Philp has also written to departments warning them they must stick to existing budgets or cut efficiency efficiencies.

A cabinet minister hinted they were worried about tightening pressure on the poorest and said the government should present ‘a very good case’ for further pressure on welfare to gain support.

They suggested that while there was reason to argue for reform of some legacy benefits, most cabinet colleagues did not want to see substantial spending cuts fall on the worst off.

Former cabinet minister Damian Green said he and other colleagues would not support welfare cuts.

“No, I wouldn’t approve of it. And no, I don’t think it would go through parliament,” he told LBC.

“And I think what we’ve learned in the last 24 hours is that the government has gone into listening mode and realizes that you can’t just get through whatever you want. And I hope that this lesson will be well learned for the future.

Former work and pensions secretary Esther McVey has urged the government not to cut benefits when it raises the ax on public spending.

“It would be a big mistake not to grant a cost-of-living increase in benefits. What we need to do is get people back to work and that will not be done by cutting benefits. We have to be a catalyst,” she said during a panel on the cost of living organized by the Center for Social Justice think tank.

Across receptions and events on the sidelines of the Tory conference in Birmingham, MPs welcomed the U-turn but hinted further damage control was needed.

Tory Tees Valley Mayor Ben Houchen told a side event that Kwarteng should go further and reinstate the cap on bankers’ bonuses that he scrapped in the mini-budget last month. “Even though we’ve rowed, the damage is already done – you have all the disadvantages of announcing this policy without actually implementing it,” Houchen said.

But there remained a core group of MPs and ministers who said Truss should double down on his tax cut plans, including a Treasury minister and one of Truss’ top campaign donors. Andrew Griffith, a City Treasury minister, told a sideline meeting that the inheritance tax would be his first choice to abolish it altogether, as did Michael Spencer, a Tory peer and City financier who has donated £25,000 to Truss’ successful bid for Tory leadership.

Along with concern over spending cuts, a revolt against the government’s fracking policy is also growing. Chris Skidmore, the MP responsible for the government’s net zero review, admitted he was “surprised at Truss’ U-turn” but said it was a good indicator of future battles. “That means fracking is definitely dead if it’s turned around.”

MPs are organizing behind the scenes to make a public and joint intervention to show that the government would not have a parliamentary majority for any vote on fracking. The Conservative Environment Network, which has 150 Conservative MPs, is currently considering forcing a U-turn.

Welfare changes and fracking are harder to defeat in parliament for MPs, as the changes may not require primary legislation.

Labor plans to make fracking one of the opposition’s top debates in order to force a rebellion. A Tory minister said there was ‘absolutely no way of fracking, parliamentary figures don’t add up’.

Meanwhile, two new opinion polls continued the recent trend and gave Labor a significant lead over the Tories, including one from Savanta Comres which put the party ahead by 25 points, the biggest Labor lead that the pollster has ever recorded with the largest vote share. .

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