Liz Truss faces fresh onslaught over benefits spending after embarrassing 45p tax U-turn
U-TURNING Liz Truss faces a new onslaught over benefits spending after her embarrassing 45p tax climbdown.
The weakened Prime Minister said she wants to emulate Mrs Thatcher, but unlike her hero, Ms Truss was for turning.
She scrapped her plans to ditch the top rate of tax for the rich after a backlash from MPs late on Sunday night.
While the Pound rallied on the back of the news to where it was before the botched mini-budget on September 23, a fresh political headache emerged for the PM on the second day of the Tory party conference.
Emboldened rebel MPs are now pushing for further changes having forced her to ditch one flagship measure — with efforts now focusing against a real terms cut to Britain’s benefits bill.
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Downing Street is eyeing hiking Universal Credit by the rate of earnings rather than inflation next April, with a possible saving of more than £5billion.
Ringleader Michael Gove said he wanted to see No10’s argument but would need “a lot of persuading”
Former Treasury Minister David Gauke said he couldn’t see how the Government refuses to grant the benefits uplift given the “very significant” cost of living crisis.
The decision will be reviewed by Work and Pensions Secretary Chloe Smith in coming weeks before it comes into place next April.
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Ministers have already decided that the so-called triple lock will apply to pensions — meaning they will go up with everyday prices.
The rebellion comes after then-Chancellor Rishi Sunak said welfare payments would rise with September’s Consumer Prices Index before coming into force.
Meanwhile, bruised Chancellor Kwasi Kwarteng was pushed on the issue yesterday but declined to comment.
Stephen Timms, who chairs the influential Work and Pensions select committee, last night wrote to Mr Kwarteng demanding the inflation uplift.
The new battlefront marked a second dismal day for Downing Street after Liz Truss held late-night talks with her Chancellor to ditch plans to scrap the top rate of tax for high earners.
‘Get on and deliver it’
Putting on a brave face as he opened his keynote speech, he said: “What a day. It has been tough but we need to focus on the job in hand. We need to move forward, no more distractions, we have a plan and we need to get on and deliver it.”
While his mini-Budget triggered turmoil on the financial markets in the City and was criticised by the International Monetary Fund, Mr Kwarteng attempted to dismiss this as “some turbulence”.
The Bank of England had been forced to intervene with a £65 billion injection — with pension funds on the verge of collapse.
Mr Kwarteng’s plans to reverse the National Insurance hike, cancel a planned rise in corporation tax and lower the basic rate of income tax remain.
But the bid to abolish the 45p rate of tax for those earning more than £150,000 caused the most controversy. He told delegates: “I get it, We are listening and have listened.”
In a difficult 24 hours in Birmingham, he got the warmest applause from delegates for saying he will review, replace or repeal EU laws retained after Brexit that are “holding our country back”.
Driving to make the tax system simpler and more competitive, he said: “Rather than bashing business, we are backing it.”
Economist Gerard Lyons, favoured by the PM, said the absence of an independent forecast by the Office for Budget Responsibility (OBR) had seen the Government pay a heavy price.
Last night, the Chancellor confirmed he would bring forward his plans for the OBR to look at his projections “shortly”. Mr Kwarteng was due to reveal them on November 23, but caved to pressure from MPs.
Despite the U-turn chaos, he said he had “not at all” considered resigning.
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Last night, Shadow Chancellor Rachel Reeves said: “What the Chancellor called a little financial disturbance is a huge economic body-blow to working people that will mean higher prices and soaring mortgages.”
Meanwhile, two new polls give Labour big leads over the Tories after their day from hell. Savanta ComRes put Sir Keir Starmer 25 points ahead while Redfield & Wilton said he had a 28-point lead.