Truss and Kwarteng under pressure to U-turn on tax-cutting plan

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Truss and Quasi Quarteng are under pressure to U-turn key parts of the mini-budget to help restore confidence in the government’s economic plans.

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Ms Truss’s leadership is already being questioned after a little more than a month, with Foreign Secretary James Cleverly saying a change at the top of the party would be a “disastrously bad idea”.

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Downing Street insisted there were no plans for further changes to the mini-budget package, but financial markets are hoping to carry forward elements of the chancellor’s tax-cutting plans to demonstrate a commitment to balance the books.

Mini-budget plans to increase borrowing to cut taxes caused turmoil in financial markets, causing Tory Poll ratings to drop, and eventually Mr. Quarteng scrapped plans to eliminate the 45p rate of income tax for top earners. left.

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But the report suggested there are talks between No. 10 and the Treasury on dropping other elements of the £43 billion tax-cut plan, including a commitment to ax a planned increase in corporation tax.

The International Monetary Fund’s (IMF) managing director said it is sometimes correct to “reevaluate” policies.

Speaking at a news conference in Washington, Kristalina Georgieva said: “Our message to everyone, not just the UK, is that at this point in time, fiscal policy should not undermine monetary policy.”

She said that “it is right to be led by the evidence, so if there is evidence that there has to be a recalculation, then it is right for governments to do so”.

Ms Georgieva also confirmed that IMF leaders had a “constructive” meeting with Mr Quarteng after the body’s chief economist said the UK government’s tax cuts risked “problems” for the British economy.

The scale of the response to the mini-budget has given rise to speculation that the position of the prime minister may be in jeopardy.

At a stormy meeting of the Backbench 1922 Committee in Westminster on Wednesday, the Chair of the Commons Education Committee, Robert Halfon, told Ms Truss that she had “erased the conservatism of the workers of the past 10 years”.

Meanwhile, Paul Goodman, editor of the influential ConservativeHome website, suggested that there is speculation to replace Ms Truss with a United ticket involving her former leadership rivals Rishi Sunak and Penny Mordaunt.

But Mr Cleverly told BBC Radio 4’s Today programme: “We have to understand that we need to bring certainty to the market.

“I think changing leadership would be a devastatingly bad idea, both politically and economically.

“We’re going to be completely focused on growing the economy.”

Mr shrewdly refused to rule out a further U-turn on the mini-budget – insisting the government was “absolutely sticking” to its tax-cutting principles – but the prime minister’s official spokesman clarified that there would be no further changes. .

“The situation has not changed,” the spokesman said.

If changes are made, economists and Tory lawmakers think a resumption of a previously planned increase in corporation tax from next April could be the most likely step.

But Mr. Cleverly told Sky News: “I think it’s absolutely right that we want to invest in businesses. It’s absolutely right that we help them stay competitive, we help them stay afloat. .

“We have to make sure we can compete internationally with other places businesses may choose to find. We have to make sure we’re tax-competitive.”

Asked whether the government would stick to the mini-budget policies, he said the “wholesale” of the mini-budget was a package to protect homes and businesses from rising energy costs.

But it was also about “making sure the taxes were lowered a little bit for the 30 million people and those are really strong principles” and “I think we should absolutely stick to them”.

He said the planned statement by the chancellor on October 31 would establish a more “holistic” view of the government’s plans, but that the “foundations” of the mini-budget were actually “critical to the development agenda put forward by the prime minister”. ,

Veteran Tory backbencher Sir Christopher Chope insisted he had “absolute confidence” in the prime minister, telling Times Radio: “If I were a betting man I would be going out now and making money on the Conservatives winning the next general election. Not with one landslide but certainly with a good majority.”

The government’s plan revolves around achieving growth in economic growth – with a target of about 2.5% annual growth in gross domestic product (GDP).

The forecast presented by the Office for Budget Responsibility (OBR) along with the chancellor’s October 31 statement will give an assessment of whether this is seen as a realistic ambition.

But Business Secretary Jacob Rees-Mogg has suggested that the government could strategically ignore OBR forecasts if it forecasts low growth and rising debt.

Downing Street, however, said Ms Truss trusted the figures produced by the OBR, the government’s official forecaster.

“The prime minister has said on several occasions that she values ​​her investigation and respects her independence. They are a highly respected body across the world,” said the Prime Minister’s official spokesperson.

Mr Rees-Mogg also blamed the Bank of England for the volatility in the value of sterling and the rising cost of government borrowing, while former Tory leader Sir Ian Duncan Smith said Governor Andrew Bailey’s handling of the position was “stupid”. ” was.

“Of course he’s not a fool” said Mr. deftly, but “that doesn’t mean we always agree with or do everything the Governor of the Bank of England says”.

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