UK Conservative MPs are plotting to prevent a possible government squeeze on welfare following Downing Street’s decision not to follow through with a plan to scrap a 45% income tax rate for top earners, according to The Guardian.
The newspaper reported that senior Tory MPs warned of further rebellions over cuts in public spending, including on benefits, something that Chancellor Kwasi Kwarteng refused to rule out.
The Guardian quoted unidentified government insiders who emphasized the need to return to a "more rigorous" system of cabinet deliberations and accountability and suggested that No. 10 may undergo a reshuffle.
“We have not had true cabinet government since the days of [former UK Prime Minister] Margaret Thatcher. That needs to change”, one source said.
The sources argued that a U-turn on a 45% income tax rate for top earners would not change the state of the public finances significantly, adding that they are alarmed over what spending cuts should be announced.
The claims came as the London-based Institute for Fiscal Studies (IFS) argued that there would need to be significant reductions in public spending unless there were further U-turns on policies that are part of Kwarteng’s mini-budget.
The IFS noted in a recent research that between 2010–2011 and 2014–2015, total public spending has been reduced cut by 3.0% "in real terms", which resulted in "a dramatic fall in public spending as a share of national income".
IFS director Paul Johnson, told The Guardian that more hefty cuts to spending are needed so as to balance the books.
“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 public services,” Johnson stressed.
This followed Chancellor Kwarteng telling the Conservative Party Conference in Birmingham on Monday that the government’s mini-budget “sets out a new approach to build a more prosperous economy”.
“It is clear that the abolition of the 45p tax rate has become a distraction from our overriding mission to tackle the challenges facing our country. As a result, I'm announcing we are not proceeding with the abolition of the 45p tax rate. We get it, and we have listened. This will allow us to focus on delivering the major parts of our growth package”, he added.
Scrapping the 45% top rate of income tax was part of the government’s Growth Plan, dubbed a mini-budget, which was unveiled on September 23 and prompted financial turmoil, with the pound plummeting to all-time low against the dollar.
10 September 2022, 10:06 GMT
Truss and her government tried to reassure the markets and their own MPs after the Bank of England was forced to make a £65 billion intervention in the bond market, while key UK mortgage lenders pulled major deals.
A number of MPs lashed out at Growth Plan, including Michael Gove, the former Levelling Up Secretary, who said that the measure displayed the “wrong values” and accused the Government of “betting too much on tax cuts.” He insisted that the decision to borrow to fund tax cuts was “not Conservative.”
Gove was echoed by former Transport Secretary Grant Shapps, who warned Truss not to have a "tin ear" to voters' concerns amid the raging cost of living crisis.
The remarks were preceded by the PM admitting for the first time last Friday that the government's mini-budget had caused some “disruption”, but doubling down on her strategy.
“This is going to be a difficult winter and I am determined to do all I can to help families and help the economy at this time,” Truss added.