Truss and Kwarteng billions short of the sums they need 鈥� can they fill hole left by tax cuts? | Sam Coates
Liz Truss put tax cuts at the centre of her campaign for Number 10, but pressure is mounting over how to pay for them.
Tuesday 11 October 2022 21:06, UK
With the government needing to find somewhere in the region of 拢60bn in public spending cuts, Liz Truss and her ministers are having to compress months of decision making into three weeks, all to be presented on 31 October.
George Osborne spent five months preparing for the cuts package he announced in 2010, which will be on a comparable scale.
There will be 24 days between the Office for Budget Responsibility presenting Kwasi Kwarteng with their first forecasts, revealing the size of hole he needs to fill, and the chancellor standing up in the Commons to explain how he can balance the books.
No wonder there is tension everywhere you look.
Politics live: 'Ominous warning' for Chancellor Kwasi Kwarteng as he faces MPs
Concerns in the Ministry of Defence that they might find ways of moving budget items around to eat into their ringfenced cash, friction between Number 10 and the Home Office over migration, with Home Secretary Suella Braverman trying to prevent yet another manifesto U-turn which would see the promise to ensure "overall numbers come down" junked - each cut will be painful.
MPs, city figures and analysts all struggle to see how the Truss government will get through the next three weeks.
The Treasury have indicated they will continue to fight to uprate benefits by earnings, not inflation, in the face of opposition from no less than Work and Pensions Secretary Chloe Smith and Business Secretary Jacob Rees-Mogg.
Even if announced, the markets may not see the implementation as credible since a Tory revolt alongside all opposition parties would look likely.
They can generate some cash raising the age the state pension can be claimed. Furthermore, they could limit the amount electricity generators can charge for electricity, effectively a backdoor windfall tax first revealed by the Financial Times.
But all of these leave Truss and Kwarteng billions short of the sums they need, which must be found to fill the hole left by the tax cuts she put at the centre of her campaign.
At cabinet today, the PM doubled down, telling her top team the tax cuts were the right thing to do. Any U-turn on that feels politically inconceivable.
Yet today Sky News spoke to the first Conservative to call for exactly such a U-turn.
Stephen Hammond, former minister and former treasury select committee member, today made the case that Kwarteng should allow the rise in corporation tax to go ahead, at least in the short term.
He makes this knowing it will be a politically toxic suggestion. However, in doing so, he is echoing a wide range of voices in the City who suggest that reversing the corporation tax rise is not the priority.
They are saying that the markets will only believe tax rises to fill the hole, since spending cut pledges can be whittled away by MPs while pledges to curb welfare can be vulnerable to Commons votes.
Several in the City believe reversing that tax cut is the only short-term, credible way forward, however far away from this the Tory parliamentary party is.
Maybe three weeks of arguing whether to go ahead with yet more cuts to services will focus or change minds.