Some Conservative MPs have already sent letters of no-confidence in Liz Truss’s leadership over fears she will “crash the economy”, a former minister has claimed.
Top economists, currency markets, opposition parties and some Tory MPs have reacted with dismay to the prime minister and chancellor Kwasi Kwarteng’s borrowing-fuelled tax cut spree.
An ex-minister in Boris Johnson’s government told Sky News that the letters which could trigger a confidence have already been sent to 1922 Committee chair Sir Graham Brady.
“Liz is f*****. She is taking on markets and the Bank of England,” the MP told the broadcaster, saying she and Treasury ministers were “playing A-level economics with people’s lives”.
The ex-minister added: “They are already putting letters in as think she will crash the economy. The tax cuts don’t matter as all noise anyway – mainly reversing back to the status quo this year.
“The issue is government fiscal policy is opposite to Bank of England monetary policy – so they are fighting each other. What Kwasi gives, the Bank takes away ... You cannot have monetary policy and fiscal policy at loggerheads.”
Tory MP Mel Stride, chair of the Treasury select committee, has suggested that Mr Kwarteng had been wrong to signal further tax cuts on Sunday, amid the dramatic decline in the value of the pound.
“One thing is for sure – it would be wise to take stock of how through time the markets weigh up recent economic announcements rather than immediately signalling more of the same in the near term,” he said.
The pound plummeted to its lowest level against the dollar since decimalisation in 1971, falling more than 4 per cent. It regained some ground to a 20-year low of $1.05 before recovering further to $1.075 just after 10am this morning.
On the pound hitting an all-time low, senior Tory backbencher Simon Hoare tweeted: “This is not good news. V worrying indeed.”
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One of the chancellor’s allies told The Times that the sharp drop in the pound’s worth was “City boys playing fast and loose with the economy ... It will settle”.
But Labour’s Rachel Reeves accused the PM and the chancellor “behaving like two gamblers in a casino chasing a losing run”, after Mr Kwarteng hinted at tax cuts beyond the £45bn package in his mini-Budget.
She told Times Radio: “Financial markets are unimpressed, the British public are unimpressed … Because they’re not gambling with their own money – they’re gambling with all our money, and it’s reckless and it’s irresponsible as well as being grossly unfair.”
Mr Kwarteng and Ms Truss are reportedly ready to go further in their tax-cutting, borrowing spree in the New Year, with possible further reductions in income tax. The chancellor told the BBC on Sunday there was “more to come”.
The government is reportedly considering abolishing a charge for parents who earn more than £50,000 and claim child benefit, increasing the annual allowances on pension pots – and offering a tax break for people who stay at home to care for children or loved ones.
Ms Reeves said the chancellor had been “fanning the flames” of the pound’s decline by talking up more tax cuts. “The chancellor instead of doubling down on his position on Friday needs to now set out credible plans,” she told BBC Radio 4’s Today programme.
In a sign of Tory unease, former chancellor George Osborne urged the government to end the “schizophrenic” policy of slashing taxes and increasing borrowing.
And Tory grandee Ken Clarke compared the Truss-Kwarteng plan to cuts taxes for the wealthy to Latin American governments. “I’m afraid that’s the kind of thing that’s usually tried in Latin American countries without success,” he told BBC Radio 4.
Ms Reeves will use her speech at the party’s conference in Liverpool on Monday to set out the party’s own plan for growth, which would begin with an initial £8.3bn investment to fund green industries.
“I don’t believe that the government has a growth plan. They say they do, but you know – you could say pigs can fly but they can’t,” Ms Reeves told Times Radio. “Trickle down economics has failed in the past, it will fail again.”