on Tories have the pressure on Liz Truss and Quasi Quarteng on benefits and their economic plans, which also came under new fire from the International Monetary Fund (IMF).
When parliament returned on Tuesday, the chancellor was warned that the government’s economic credibility would be further tarnished if he tried to push through the policy without the support of Conservative MPs.
At the shipping box, Mr Kwarteng was warned by senior Tory Mel Stride to contact members in the House of Commons to “make absolutely sure” he can approve the measures or “disrupt the markets”.
He was also told by the former Cabinet Minister Julian Smith that the Government must not balance the coming tax cuts “on the backs of the poorest people in our country”.
The dire warnings at a session of Treasury questions highlighted the ongoing deep rifts in the Tory party caused by Mr Kwarteng’s mini-budget and the government’s refusal to rule out a real cut in their incomes for benefit recipients.
A decision on whether benefits will increase in line with inflation or earnings will be announced by Mr. Kwarteng on October 31 during his medium-term budget plan, it has been confirmed.
The financial strategy will set out how the government plans to reduce debt as a percentage of national income in the wake of the £43bn mini-budget tax giveaway and commitment to curb energy bills for the next two years.
The chancellor will have to find more than £60 billion in cuts to get public finances back under control if he doesn’t cancel the tax cuts, the leading economic think tank warned the Institute for Fiscal Studies (IFS).
In response, Downing Street said Ms Truss still rejects austerity measures.
When asked whether she supported her predecessor Boris Johnson’s promise that there would be no return to the austerity era, the prime minister’s official spokesman said: “Yes.”
He continued: “These are challenging times and we have made significant multi-billion dollar interventions to provide the support needed to protect people from these global challenges.
“Of course that will require some spending decisions, but it will be the chancellor who comes forward to map those out.”
No. 10 also championed the government’s agenda to cut taxes, despite the IMF’s suggestion that it has made the Bank of England’s struggle to curb inflation more difficult.
“I think the government is pursuing a policy of supporting the British people at a time of high global prices.
“That’s why we think it’s right to step back from the highest tax burden in 70 years and make sure the public can keep all the money they make,” said Ms Truss’s spokesperson.
The Washington-based organization said the UK is on track for a significant slowdown in growth from 3.6% this year to 0.3% in 2023.
The prime minister’s spokesman said the “forecasts were prepared before the announcement of the growth plan and the energy price guarantee”, pointing to the IMF’s suggestion that the government’s fiscal measures are expected to boost growth in the near term.
Ms Truss and Mr Kwarteng remain “committed” to the growth measures outlined in the Chancellor’s mini-budget, despite the subsequent market turbulence that forced the Bank of England to intervene again, the official said.
“The Prime Minister remains convinced that the measures outlined will ensure growth in the economy.
“The Chancellor has set out our position on taxation and reducing the tax burden,” he added, saying the government’s position “has not changed”.
But they are under mounting pressure to change course again, having already been forced to abandon plans to scrap the 45 pence top rate.
The latest emergency intervention by the central bank to calm down markets shaken by the mini-budget was not discussed with the cabinet on Tuesday, Ms Truss’s spokesman said.
The central bank intervened with further emergency measures for the second day in a row to prevent a “fire sale” of British government bonds, which it said posed a “material risk to the UK’s financial stability” after long-term government bond yields rose again on Monday.
The spokesman said the Bank’s intervention is “in line with its objective of financial stability and we are in regular contact with the Bank, which will monitor markets closely in the coming days”.
Ms Truss will hold a series of meetings this week with mutinous MPs in a bid to gain support for her plans after a scorching government conference season.
In a break with tradition, the Prime Minister’s spokesperson is not present at the cabinet under Mrs Truss.
Under her predecessor, Mr Johnson, the official was always present, but she has not been to either cabinet since Mrs Truss took office.