Liz Truss has a matter of days to row back on controversial tax and welfare cuts or face a parliamentary rebellion which could see her removed from Downing Street by Christmas, Conservative MPs have warned.
As the prime minister arrived in Birmingham for her first annual conference as leader, senior backbenchers told The Independent that MPs across the party are “livid” at suggestions she plans to renege on a promised benefit uprating to pay for tax cuts for the rich in chancellor Kwasi Kwarteng’s mini-Budget.
One described the combination of austerity for the poor and giveaways for the wealthy as “electoral suicide” and confirmed Tory MPs were talking to Labour on parliamentary means of stopping it.
While organised plots have not yet formed, they expected them to get under way in earnest unless Ms Truss shows signs of backing down by the time the Commons returns from recess on 11 October.
Former Tory chancellor Kenneth Clarke told The Independent that Ms Truss and Mr Kwarteng need to “learn important lessons quickly” after a “politically inept” mini-Budget including £45bn of unfunded tax cuts, which sent the markets into freefall and Labour surging to leads of as much as 33 points in the polls.
Another veteran of Sir John Major’s Treasury team, Phillip Oppenheim, said Ms Truss was “quite possibly the last ever Tory prime minister”.
“Nothing in last week’s mini-Budget indicates that our new leaders have the slightest grasp of our long-term structural problems or the solutions, beyond a half-digested, two-dimensional version of Thatcherism,” said Mr Oppenheim.
Meanwhile, the chair of the influential Commons Treasury Committee, Mel Stride, warned Mr Kwarteng that delay in releasing his medium-term fiscal plan – and the Office for Budget Responsibility (OBR) spending watchdog’s assessment of its impact – could inflict misery on millions by encouraging the Bank of England to go for a higher hike in interest rates.
The former Treasury minister urged the chancellor to bring forward publication from 23 November to allow the Bank’s Monetary Policy Committee (MPC) to assess City reaction before its 3 November rate-setting meeting, at which analysts expect a rise of as much as half a percentage point.
The PM and chancellor insisted they were sticking with their timetable after meeting the OBR on Friday. But Mr Stride told The Independent: “If the OBR forecast appears before the MPC meeting, and if it lands well with the markets, then there will be less uncertainty, less pressure on sterling and bond yields and that might then lead to the MPC deciding it can go with a lower, less painful interest rate hike than would otherwise have been the case.”
Backing early publication, veteran Tory MP Sir Roger Gale told The Independent that Ms Truss and Mr Kwarteng “have got to move very quickly indeed, because people are frightened”.
With around 1.6 million households on variable rate mortgages worth an average of around £140,000 – and 300,000 coming off fixed-rate deals every quarter – a variation of as little as a half-point in the rate can add £700 a year to the typical living costs of large numbers of voters, and significantly more to many of them.
Sir Roger said Ms Truss would be under “very considerable pressure” by the end of the year unless she could offer some reassurance to the public on the economy.
“I know what it’s like to have men and women in tears because they’re having their homes repossessed,” he said.
One former minister told The Independent: “She needs to reverse Kwarteng’s abolition of the 45p additional rate of income tax and she needs to stop talking about benefit cuts, because it’s electoral suicide.
“Her position is precarious. There was no justification for the measures they’ve announced, which went way beyond what she promised in the summer. There are no organised conspiracies I’ve heard of but mainstream opinion right across the party is angry, and unless something changes soon people will be having discussions when we get back to the Commons next week.”
One Tory MP said some backbenchers were now talking about moving against Ms Truss – including discussion about what form a leadership contest could take – if her handling of the economy does not improve in the next couple of months.
The backbencher said that, despite the risk involved in removing yet another leader after three were forced out in six years, it was “very difficult to see how we recover” with Ms Truss in charge.
While current rules give a new leader a year’s grace before facing a challenge, several MPs pointed out that the backbench 1922 Committee has the power to change rules, as it threatened with Boris Johnson.
Some suggested that any reform would have to prevent a repeat of this summer’s drawn-out leadership contest which handed the final decision to 175,000 party members. Talk has already begun over the possible “coronation” of a single candidate – as happened with Michael Howard in 2003 – to take the decision out of members’ hands.
One Rishi Sunak-backing MP said it would be “utterly bonkers” to have another contest so soon, but added: “The anger may be such that colleagues feel differently – the rules can always be changed.”
Another said: “I think the 45p decision is untenable and I can’t see it getting through parliament. When the government is then talking about leaning into a squeeze on spending – and particularly welfare – it’s an extremely bad optic.”
Ministers have refused to confirm the inflation-matching boost to benefits of around 10 per cent promised by former chancellor Mr Sunak, with reports suggesting Ms Truss may seek to limit the rise to average pay at about 6 per cent.
New UK Prime Minister Liz Truss inherits an economic storm
The MP said the “politically toxic” move would deliver only about £6bn towards a black hole of as much as £60-70bn likely to be revealed in the OBR report but would be regarded – along with mooted cuts to public service spending – as “completely acceptable” by many Tories.
“I think she’s in enormous peril,” said the backbencher. “It’s not ridiculous to suggest she may be gone by Christmas. That is possible. Everything is pushing towards her having to unwind some of these policies, but the question is whether she tries to be an immovable object when that irresistible force hits.”
Ms Truss admitted on Saturday there had been "disruption" in the UK economy as a result of the mini-Budget.
However, she showed no sign of preparing a climbdown, insisting she had "acted decisively" and would keep an "iron grip" on the nation’s finances. Close cabinet ally Simon Clarke hinted strongly at spending cuts, saying the UK’s “extremely large” state needed to be brought “in full alignment with a lower tax economy”.
And Mr Kwarteng said he had “no choice” but to announce measures which he acknowledged were “not universally popular”. Signalling cuts ahead, he insisted he would produce a “credible plan” to get the public finances back on track with a “commitment to spending discipline”.
Former leadership challenger Jeremy Hunt said it was “premature” to pass judgement on Ms Truss.
“She won the election fair and square and we have to give her time,” he told GB News.
“I think that in a couple of months’ time the markets will have settled down, we will have shown the country as Conservatives how we’re going to balance the books… And that I think will be the time to make judgements.”
Truss supporter Alexander Stafford, whose Rother Valley seat is among the 2019 Red Wall constituencies thought most vulnerable to a Labour fightback, insisted that the conference was a “great opportunity” for the PM.
“I think conference will be a great opportunity for Liz to set out her full stall to the nation and really show the long-term positive changes she will be making,” he told The Independent.