Tuesday 4 October 2022 07:48 AM Liz Truss faces Cabinet revolt on plan to cut benefits trends now

Liz Truss is facing a Cabinet revolt on plans to cut benefits to balance the books - as Kwasi Kwarteng U-turns again by bringing forward his spending blueprint and OBR forecasts to this month.

The PM is set to defy dozens of Tory MPs by uprating benefits in line with earnings rather than inflation, meaning a real-terms cut. 

She will argue it would be unfair to go beyond what workers are receiving, and the move will save the government around £7billion.  

But speaking to Times Radio, Commons leader Penny Mordaunt said it 'makes sense' to increase benefits in line with inflation. She said: 'We want to make sure that people are looked after and that people can pay their bills.

'We are not about trying to help people with one hand and take away with another.'

One Cabinet minister told MailOnline: ‘Who has been briefing this stuff? Are we really going to do it? I can’t see how it is possibly going to happen.

‘I am a fiscal hawk but even I don’t think you can keep benefits down. We’ve had enough of a row over the top rate of tax - benefits would be even worse.'

Work and Pensions Secretary Chloe Smith is also thought to have significant doubts over the plans. 'We know that people are struggling with some of the costs that are rising,' she told conference yesterday. 'That's why protecting the most vulnerable is a vital priority for me and this government.'

The scale of opposition will raise fears that the premier could be forced into another U-turn, further hammering her reputation for decisiveness. 

Mr Kwarteng is expected to declare today that he is bringing forward his promised fiscal statement setting out how he will balance the books - and crucially the OBR watchdog's verdict on the finances - from November 23. 

The event is now set to take place this month, after markets dived and he endured intense pressure from MPs and economists.

The volte face comes on top of the dramatic shift on the top rate of tax, which is staying despite both Ms Truss and Ms Kwarteng staunchly insisting it would be abolished until yesterday.

The powerful 1922 Committee chair Sir Graham Brady played a key role in the climbdown, meeting with Ms Truss on Sunday night to warn that she would not get her planned tax cuts through Parliament, despite a 71-seat majority.

‘Her position is such that she really can’t afford to make any more mistakes,’ said a former minister who backed her leadership bid. ‘She has basically used up all her nine lives in one fell swoop.’

A Cabinet source also voiced disquiet, saying: ‘The trouble with U-turns is that every time you make one you get weaker.

‘Boris had too many U-turns, Theresa had far too many. We are trying to do some very difficult things and we cannot afford many more.’

The warnings came as:

Former Home Secretary Priti Patel is firing a warning shot over Ms Truss' unfunded tax cuts, saying Tories will 'live or die' by their economic credibility.

At a fringe event she is due to accuse the PM and Mr Kwarteng of 'spending today with no thought of tomorrow'.

Ms Patel will also call on Ms Truss to put a 'ceiling' on spending in the public sector, adding that there is a cap on 'the amount we can afford', according to The Times.

'We are spending today with no thought of tomorrow, and like the Blob in the old horror film, the more resources are absorbed today, the bigger the problem gets and the more resources it will need to eat up tomorrow,' she is expected to say.

'Right now, we have got into a pattern of borrowing huge amounts to fix today’s urgent problems or generate short-term populist headlines. 

'Each time it seems that there’s a good case, but what does this mean for future generations?

'I want to see our party regain its credibility by restoring its commitment to sustainable public spending, which is affordable today, tomorrow and for the foreseeable future.'

Backbench opposition to a real term benefits cut is also said to be mounting with senior party figures including the influential Mr Gove voicing their concerns. 

Mr Kwarteng formally dropped the plan to scrap the 45p tax rate – paid by workers on more than £150,000 – yesterday morning, less than 24 hours after the PM had insisted she was ‘absolutely committed’ to it.

One Downing Street source told The Telegraph said 'it wasn't worth the pain of keeping it', adding that 'the view from ta political and communications point of view was that we just had to lance the boil'.

The Chancellor took responsibility for the change of direction, saying ministers had ‘got it wrong’. He added: ‘I’m listening, and I get it, and in a spirit of contrition and humility I have said “actually this doesn’t make sense, we won’t go ahead with the abolition of the rate”.’

Ms Truss yesterday said the issue had become ‘a distraction from our mission to get Britain moving’.

In an LBC interview to be broadcast this morning, the PM was asked six times to rule out further U-turns but would only say: ‘I’m determined to carry on with this growth package.’

Mark Littlewood of the Institute of Economic Affairs, which backed the tax cut, acknowledged it had become ‘a political hot potato’ but voiced concern over it being dropped. 

He said: ‘Of course, it will raise the question that the next time Kwasi Kwarteng makes an announcement that Grant Shapps and Michael Gove don’t like, does that announcement stick? 

'You always worry about that when you see a U-turn. 

I’ve known Liz Truss for many years and I can’t think of another time where she’s changed her mind on anything, anything at all.’

She is also said to be mystified by the decision of many Conservative MPs to publicly oppose a significant tax cut.

She is expected to use her main conference speech in Birmingham tomorrow to insist that her vision of lower taxes and less red tape is the only way to tackle anaemic economic growth.

Meanwhile, Tories will attempt to shift the focus away from the economy today following the humiliation of two U-turns on income tax cuts for the highest earners and the date of a new fiscal plan.

Keynote speeches at the Tory conference in Birmingham by Home Secretary Suella Braverman and Foreign Secretary James Cleverly will aim to set out the Government's plans on immigration and commitment to support Ukraine.

Ms Braverman will use her conference speech to call for the French to stop more boats crossing the English Channel and set out her intention to bring in new laws to make it easier to deport people who come to the UK illegally. 

The Home Secretary will promise to allow 'the kind of immigration that grows our economy' but 'end abuse of the rules'. 

Mr Cleverly, meanwhile, will declare that Britain has the 'strategic endurance' to see Ukraine through to victory over Russian invaders. 

The Foreign Secretary will say that Ukraine has the UK's unwavering support in its efforts to push back Vladimir Putin's forces, saying that 'we are players on the pitch' and not just 'commentators'. 

He will also repeat Ms Truss's vow that the UK will never accept Russian President Vladimir Putin's annexation of the regions of Donetsk, Luhansk, Kherson, Zaporizhzhia or Crimea.

The Prime Minister has admitted that it had not been an 'easy' week but indicated she was sticking with the rest of the tax-cutting package.

She told the Express newspaper: 'Express readers can rest assured: we will reward your trust. It has not been an easy week, but we have shown that we listen to people's concerns and we are determined to deliver on our core plan for economic success and security.

'Our plan for growth is essential to get the British economy moving. Growth is the only way to create jobs, boost wages and fund our vital public services like the NHS.

In his address yesterday, the Chancellor acknowledged it had been a ‘tough’ day but added: ‘We can’t sit idly by. What Britain needs more than ever is economic growth and the Government is wholly committed to economic growth.

‘That is why we will forge a new economic deal for Britain backed by an iron-clad commitment to fiscal discipline.’

A senior Conservative source said that by Sunday evening the PM and Chancellor had decided that the controversy over the 45p tax rate was diverting too much attention from the Budget’s ‘core package’ of help with heating bills, tax cuts and reforms to boost growth.

It followed a rebellion led by former Cabinet ministers Michael Gove and Grant Shapps who warned that they and other Tory MPs were willing to join forces with Labour to defeat the plan in the House of Commons. Mr Gove said the plan to cut taxes for people earning more than £150,000 a year was a ‘display of the wrong values’. Mr Shapps said the ‘politically tin-eared’ move had ‘managed to alienate almost everyone’.

But Paul Johnson, director of the Institute for Fiscal Studies, predicted that more U-turns were likely. He said not scrapping the 45p tax, a policy which would have cost £2billion a year, was only a ‘rounding error in the context of public finances’.

With around £43billion of unfunded tax cuts remaining, Mr Johnson warned: ‘The Chancellor still has a lot of work to do if he is to display a credible commitment to fiscal sustainability.

‘Unless he also U-turns on some of his other, much larger tax announcements, he will have no option but to consider cuts to public spending: to social security, investment projects or

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