Category Archives: Tax and spending

The unravelling: the full story of how Liz Truss lost her way – and her authority in the Tory party

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The prime minister ditched her close ally Kwasi Kwarteng to save her own job – but now Conservative MPs are openly plotting to replace her

After an astonishing eight-minute press conference, in which Liz Truss attempted to salvage her imploding leadership by firing her closest political ally and ditching a totemic policy that won her the job, the most telling reaction was that of officials who had served in Boris Johnson’s chaotic Downing Street.

Just a few short months ago, they had been forced to endure months of scandal, followed by the resignations of dozens of ministers. They had even awkwardly brushed shoulders with cabinet members gathered in Downing Street to tell Johnson that his time was up. But after watching Truss’s hunted demeanour on Friday afternoon, their suffering suddenly seemed trifling.

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Jeremy Hunt says difficult decisions ahead after Truss ‘mistakes’

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New chancellor vows to be ‘completely honest with country’ amid rumours PM has only weeks left in role

The new chancellor, Jeremy Hunt, has spoken of “mistakes” made by the Liz Truss administration and predicted “difficult decisions ahead”.

Appearing on Sky News on Saturday, in his first interview since replacing Kwasi Kwarteng on Friday, the former health secretary signalled he would have a “clean slate” when it came to the budget, and vowed to be “completely honest with the country” amid rumours that Truss has only weeks left as prime minister.

Hunt, who was parachuted into No 11 in an attempt to restore order to Truss’s ailing government, also suggested that some taxes could rise, as he promised to bring stability to the UK in the wake of the disastrous mini-budget.

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Truss premiership ‘hanging by thread’ after Kwarteng sacking and latest U-turn

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PM’s move to replace chancellor and commit to raising corporation tax fails to placate markets or Tory MPs

Liz Truss is desperately clinging to her premiership after she sacked her chancellor and ripped up the mini-budget but failed to calm the financial markets or furious Conservative MPs.

In a humiliating reversal, the prime minister backed down on plans to scrap an £18bn rise in corporation tax and replaced Kwasi Kwarteng as chancellor with Jeremy Hunt.

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Kwasi Kwarteng reportedly believes Liz Truss ‘only has a few weeks’ – as it happened

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Source close to sacked chancellor briefs Times that ‘wagons are still going to circle’ around embattled prime minsiter

The Conservative peer, Ed Vaizey, said he disagreed with the international trade secretary, Greg Hands, who earlier said Kwasi Kwarteng’s early return is not unusual. “It is quite unusual for this to happen,” he said.

Speaking to Sky News, Vaizey said the chancellor cutting his trip to the US short is “not a good sign”. He said:

I’m afraid the chancellor coming back a day early doesn’t fill one with confidence.

The fact that people were speculating about the prime minister’s leadership this early in her premiership is not ideal, but I think he’s just got to bite the bullet. He’s got to try to give the markets confidence in the British economy.

If he can do that then perhaps he can say: ‘Well, I had to do some difficult choices, slightly humiliating choices, but the result is stabilisation and I can move forward.’

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Liz Truss bows to pressure with corporation tax U-turn ‘on the table’

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Speculation that reversal on leadership campaign pledge risks split with her chancellor, Kwasi Kwarteng

Liz Truss has bowed to intense pressure from Conservative MPs and the markets by agreeing to redraw her mini-budget, paving the way for a major U-turn on her signature corporation tax cut.

In another serious blow to her authority as prime minister, government sources told the Guardian that a climbdown on the plan to scrap the rise in corporation tax was now “on the table”.

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Another U-turn looms – how much will it save and what else could the chancellor ditch?

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Corporation tax plans likely to be latest to be dropped – bad news for Kwarteng’s credibility, but good for his balance sheet

Liz Truss is on the verge of reversing one of the last major pillars of her chancellor’s disastrous September mini-budget.

While Kwasi Kwarteng mingles with finance ministers at the International Monetary Fund gathering in Washington DC, discussions are taking place in London that would see the promise to freeze corporation tax rates binned. There is also speculation about dropping smaller measures including a more generous tax treatment of share dividends. These U-turns would come hard on the heels of the humiliating climbdown on Kwarteng’s promise to scrap the 45p top rate of tax.

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‘Let’s see’: pressure builds for No 10 U-turn on corporation tax

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Reversing key plank of her leadership pitch would be much bigger humiliation for Liz Truss than 45p rate U-turn

The clamour among Conservative MPs for a third U-turn by Liz Truss started the same as the others: one MP begins as an outrider, backed by some party veterans or ex-cabinet ministers, and the question catches alight across broadcasters who ask every MP they see. Soon enough, it is received wisdom.

Most MPs who are squeamish about deposing their third prime minister had hoped that they would see change in the markets and contrition from No 10 and 11 after the U-turn on the 45p rate. Over the course of the past week, it has been clear to them that will not happen.

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Poorer families risk £1,000 hit from earnings-related benefits rise

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Below-inflation rise would save exchequer tenth of £40bn to be given out through tax cuts, says thinktank

If the government raises benefits in line with earnings rather than inflation next year, it would drastically cut the incomes of poorer working-age families, while saving less than a tenth of the cost of recent tax cuts, a leading economic thinktank has calculated.

Such a change, which would mean a significant real-terms cut given that wages are rising at 5.5% with inflation close to 10%, could see the effective income of some families reduced by up to £1,000 a year, the Resolution Foundation said.

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Liz Truss insists tax cuts will go ahead despite public spending promise

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PM suggests borrowing will rise as she surprises MPs by saying she has no plans to cut public spending

Liz Truss has said the Conservatives will push ahead with tax cuts without cutting public spending, instead allowing borrowing to rise over the next few years.

Senior economists had warned on Wednesday that such a strategy, if set out by Kwasi Kwarteng in the chancellor’s fiscal plan at the end of this month, would be likely to spook investors, creating renewed market turmoil.

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Starmer’s chief of staff to leave job as Labour leader unveils major party shake-up – UK politics live

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Latest updates: Labour leader hoping to put party on war footing ahead of next election

In the supreme court Dorothy Bain KC, the lord advocate, the Scottish government’s most senior law officer, is now setting out her case.

Here is the 50-page submission to the court setting our her case that was released in July.

Despite the political context of this reference, the questions the court has to decide are limited to technical questions of law. The court will decide them by applying legal principles.

The court will require time after the hearing to prepare its judgement. The hearing is the tip of the iceberg. We also have more than 8000 pages of written material to consider.

Therefore, as usual, is likely to be some months before we get our judgement.

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Unfunded tax cuts mean UK ‘will need £60bn spending cuts’

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IFS says Kwasi Kwarteng’s mini-budget will leave ministers making serious reductions in public services

Kwasi Kwarteng will need to find £60bn of savings by 2026 to fill the gap left by unfunded tax cuts and the costs of extra borrowing triggered by a panicked reaction on international money markets to the chancellor’s “mini-budget”, according to the Institute for Fiscal Studies.

The UK will also struggle to hit the chancellor’s 2.5% growth target, with economic forecasts by the investment bank Citigroup that the IFS uses to underpin its analysis showing the UK will struggle to grow at more than 0.8% on average over the next five years.

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IFS: Millions in Britain ‘face stealth tax raid’ under Liz Truss’s plans

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For every £1 given workers by cutting tax rates £2 was being taken via freeze on income tax thresholds, thinktank calculates

Millions of households are facing a “stealth” tax raid under Liz Truss’s government despite her promise to support workers through the cost-of-living crisis by lowering their tax bills, Britain’s leading economic thinktank said on Wednesday.

The Institute for Fiscal Studies (IFS) has calculated that for every £1 given to workers by cutting headline tax rates, £2 was being taken away through a freeze on the level at which people begin paying tax on their earnings.

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Liz Truss refuses to rule out real-terms benefits cuts

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PM facing fresh battle with MPs as she declines to commit to raising benefits in line with inflation

Liz Truss has refused to commit to raising benefits in line with inflation, amid a fresh battle with MPs over cuts to spending including concern from among her cabinet.

The prime minister said pensions would rise in line with inflation, having committed to the pensions “triple lock” during the leadership campaign. But she said people on welfare benefits were in a “different situation” and said they were more able to look for more work.

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Kwasi Kwarteng set to address Tory conference with authority on the line after 45% tax rate U-turn – UK politics live

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Chancellor expected to give changed address after confirming plan to axe top rate of income tax has been scrapped

Q: Where does this leave your credibility?

Kwarteng says he has been in parliament for 12 years. He says ministers do sometimes change their minds.

I decided, along with the the prime minister, not to proceed [with the policy].

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Labour demands names of guests at champagne event Kwarteng attended

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Drinks reception with wealthy Tory donors took place on same day the chancellor delivered mini-budget

Pressure is growing on the Tory party to provide a full list of attendees at a private champagne reception attended by the chancellor, Kwasi Kwarteng, hours after he delivered his mini-budget.

Anneliese Dodds, the Labour chair, has written to her Conservative counterpart, Jake Berry, calling on him to release a list of those in attendance and whether they pledged donations or paid a fee to be there.

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Truss’s mini-budget looks likely to cost the Tories the next election | Pippa Crerar

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Tory MPs fear voters see them as the nasty party again after the prime minister refused to rethink tax cuts for the rich

Liz Truss has long channelled Margaret Thatcher – echoing her rhetoric, her free market instincts and even her clothes – but as the Tory conference kicked off in Birmingham on Sunday many in her party were hoping that she would relinquish ambitions to be the next Iron Lady and drop her mini-budget plans.

There were early glimmers of hope. In an article for the Sun, she admitted her proposals would cause “short term disruption” but that she had an “iron grip” on the country’s finances. Then she told the BBC she understood public concerns. “I do accept we should have laid the ground better,” she said.

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Liz Truss admits she should have ‘laid ground better’ before mini-budget and says cabinet not consulted about 45% top rate tax cut – live

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Latest updates: PM vows to press ahead with mini-budget plans and dismisses objections to top rate of tax being axed

Q: Are you absolutely committed to getting rid of the 45% rate of tax?

Yes, says Truss.

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Serco injected £60m to prop up pension fund after market meltdown

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£1bn scheme is latest to scramble to raise cash after chancellor’s tax-cutting mini-budget sparks turmoil

The pension scheme trustees at the government contractor Serco have been forced to tap the company for £60m of emergency support after the UK’s financial markets meltdown this week.

Serco’s £1bn pensions scheme is the latest to scramble to raise cash after a plunge in the pound and a meltdown in UK bond prices triggered calls on fund managers to provide collateral for niche financial products they had taken out to hedge against swings in the value of their investments.

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Truss and Kwarteng to hold back OBR forecasts for six weeks

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PM and chancellor say they will not publish projections until late November despite them being ready next week

Liz Truss and Kwasi Kwarteng will refuse to release forecasts from the Office for Budget Responsibility (OBR) until more than six weeks after receiving them, despite calls for them to be published as soon as possible.

The prime minister and chancellor said they would only publish the independent forecasts on 23 November alongside a fiscal statement, despite them being ready on 7 October.

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Truss ‘standing by Kwarteng’ as Treasury defends plans despite market turmoil – as it happened

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No 10 says PM has faith in chancellor, as Treasury minister says tax cuts are the ‘right plan’. This blog is now closed

Q: When would you get debt falling as a proprotion of GDP?

Starmer says Labour does want to get that down.

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