Liz Truss: what happened at 1922 committee meeting - as Tory MPs urge Prime Minister to reverse tax cuts

Liz Truss has something of a mutiny on her hands as her own MPs call for her to reverse her tax cuts and accuse her of “trashing the last 10 years” of the Conservative Party’s record.

At a brutal meeting with the backbench 1922 Committee, which the Prime Minister had originally called in a now-failed attempt to quell discord within her party, Tory MPs openly discussed the prospect of ousting their leader. Concerns were raised about Labour’s dominance in the polls as backbenchers once again urged Truss to reverse her tax-slashing agenda.

It comes after the Prime Minister failed to reassure the financial markets during her PMQs session yesterday (12 October), in a performance her own MPs slammed as “just appalling”. Truss “absolutely” ruled out further public spending cuts, contradicting what members of her Cabinet have said over the past few weeks while also making a seemingly impossible commitment. Economists have said in order to avoid reducing spending, the government will have to raise taxes - which of course, is a policy the Prime Minister has frequently dismissed.

Robert Halfon, chair of the education select committee, told Truss she had “trashed the last 10 years of workers’ Conservatism,” citing achievements such as apprenticeships and levelling up, which were carried out under David Cameron and Boris Johnson, and comparing those priorities to tax cuts and bankers’ bonuses.

Meanwhile, chairman of the Commons Treasury committee Mel Stride suggested the only thing that could reassure the markets now would be “some element of further row back” on the government’s £43 billion tax-cutting package. He suggested that gaining “credibility” would consist of “swinging towards evidence of a clear change in tack rather than just coming up with other measures that try to square the fiscal circle”, adding that Chancellor Kwasi Kwarteng would only have “one opportunity” to land his new fiscal plans positively.

But while these concerns were raised - and other MPs voiced anxieties about soaring mortgage rates and the planned cuts to corporation tax - Truss refused to confirm any U-turns and stuck to her insistence that tax cuts will boost growth. She also harked back to her energy package, telling the group that small businesses would have faced “devastation” if the government had not acted to cap energy prices. Amidst all the chaos, Number 10 too has publicly denied any new examinations of the Chancellor’s mini budget.

Leaving the room, one MP described the atmosphere as “funereal” while another reported that Truss had done “absolutely nothing to reassure colleagues”. The markets too seem less than reassured, with yesterday bringing in another bout of economic turbulence as the pound fell against the euro and the dollar and the cost of government borrowing rose once again.

Since Kwarteng’s 23 September mini budget, the government was forced to U-turn on its plans to cut the 45p income tax rate for top earners, the value of the pound has hugely fluctuated, and the cost of state borrowing rose to such an extent that the Bank of England was forced to intervene with an emergency bond-buying scheme to prevent problems for pension funds.

On 31 October, the Chancellor will announce a Medium-Term Fiscal Plan. Unlike the mini budget, this economic announcement will be accompanied by a forecast from the Office for Budget Responsibility, but Jacob Rees-Mogg, one of the few MPs still supporting the Prime Minister, suggested the forecast could be ignored if it predicted low growth and rising debt.

Perhaps anticipating a fallout, the Business Secretary told ITV: “[The Office’s] record of forecasting accurately hasn’t been enormously good.”

Truss and Kwarteng are expected to hold a series of meetings with disapproving MPs over the coming weeks in an attempt to assure them that the new fiscal plans will address their concerns. But with reports from the Institute For Fiscal Studies saying Truss would only be able to keep her tax cuts if she announced spending cuts worth £60bn by 2026-27, accompanied by her refusal to stray from her tax-slashing policies, it seems unlikely many will be convinced. The Prime Minister’s leadership then may be in the most severe peril yet.