Liz Truss’s economic vision appeared doomed on Sunday, as she sought to stay in power despite an increasingly shaky-looking premiership.
New Chancellor Jeremy Hunt, brought in to replace the sacked Kwasi Kwarteng and to restore credibility to Downing Street, spent Saturday effectively trashing the mini-budget and the set of policies that brought Ms Truss to power.
Amid warnings of “difficult decisions” to come over the next two weeks, Mr Hunt and Ms Truss will meet in her Chequers residence on Sunday as tax rises and spending cuts loom on the horizon.
“Too far, too fast”
The Chancellor, who spent Saturday also meeting with Treasury officials, insisted that he and the Prime Minister were a “team” as he said that his priority was “growth underpinned by stability”.
“The drive on growing the economy is right – it means more people can get good jobs, new businesses can thrive and we can secure world class public services. But we went too far, too fast,” he said.
Earlier, he told broadcasters: “Spending will not rise by as much as people would like and all Government departments are going to have to find more efficiencies than they were planning to.”
“And some taxes will not be cut as quickly as people want. Some taxes will go up. So it’s going to be difficult.”
As Mr Hunt begins his job of putting together a fresh budget for October 31 one possible plan, as reported in the Sunday Times, would be to delay his predecessor’s aim of reducing the basic rate of income tax by a year as part of a wider package designed to calm the financial markets.
Earlier, Governor of the Bank of England Andrew Bailey said he spoke to Mr Hunt on Friday after his appointment as he warned that interest rates may have to be raised higher than initially expected to tackle inflation.
Speaking from Washington, he said the pair had a “meeting of minds” on the issue of “fiscal sustainability” as he noted the fact the Office of Budget Responsibility is now “very much back in the picture”.
US President Joe Biden also appeared to join in the criticism of Ms Truss’s plan, telling reporters: “I wasn’t the only one that thought it was a mistake,” and calling the outcome “predictable”.
Asked about her original economic strategy, he added that while he disagreed with her plan, it was up to the British people.
Mr Biden also dismissed concerns about the strength of the dollar: “The problem is the lack of economic growth and sound policy in other countries.”
Questions still hang over the Government about whether it would be able to win enough support from a divided party for a series of painful decisions on tax and spending that have already prompted memories of the austerity era under David Cameron and George Osborne.
In a media blitz over the weekend, both Mr Hunt and Ms Truss tried to win over their own party and voters to the new Downing Street regime.
After completing several interviews on Saturday, the new chancellor will later appear on BBC One’s Sunday with Laura Kuenssberg.
Ms Truss, who used a piece in The Sun newspaper to admit that sacking her friend and ideological soulmate Mr Kwarteng had been a “wrench”, said: “We cannot pave the way to a low-tax, high-growth economy without maintaining the confidence of the markets in our commitment to sound money.”
Mr Hunt, writing in the Telegraph, said that the Government was “changing course”.
So far, his appointment has failed to dampen speculation of an imminent coup against Ms Truss.
Rishi Sunak, the defeated leadership contender and former chancellor, as well as Defence Secretary Ben Wallace, have been among the names flagged as potential replacements.
Sir Geoffrey Clifton-Brown told LBC on Saturday that for Ms Truss it all hinges on how the markets receive the fiscal plan at the end of the month.
Steady the ship
While he said he believes Mr Hunt could steady the ship, he warned that if “it doesn’t manage to satisfy the markets and satisfy everybody else and the economy is still in chaos then I think we would be in a very difficult situation”.
Elsewhere, there was speculation that including the Ministry of Defence in any round of spending cuts could spark a clash with Mr Wallace.
A defence source said he will hold Ms Truss to the pledges made.
Ms Truss promised to increase defence spending to 3 per cent of GDP by 2030 in the wake of the war in Ukraine.
The Prime Minister nonetheless still has her defenders within the party.
Former culture minister Nadine Dorries, a loyal follower of Boris Johnson, wrote in the Daily Express: “The sad truth is that those scheming to eject the Prime Minister from Downing Street are the same plotters who conspired to get rid of Boris. They will not rest until they have anointed their own chosen leader in power.”
The Labour Party, looking on as it enjoys a mammoth lead in the polls, said that there were “no historical precedents” for the crisis the Truss administration had plunged the country into.
In a speech in Barnsley, Sir Keir Starmer referenced former party leader Neil Kinnock’s famous 1985 attack on the left-wing Militant group in Liverpool as he pointed to the “grotesque chaos of a Tory Prime Minister handing out redundancy notices to her own Chancellor”.