‘Kwarteng must get MPs’ backing for fiscal plan or risk unsettling the markets’

Chancellor Kwasi Kwarteng has been warned he will “unsettle the markets” unless he secures support from MPs for his economic policies.

Senior Conservative MP Mel Stride cautioned Mr Kwarteng to reach out to members across the Commons to be “absolutely certain” he can get the measures approved or run the risk of further economic turmoil.

Tory colleague Julian Smith, a former cabinet minister, also insisted the Government must not balance forthcoming tax cuts “on the back of the poorest people in our country”.

Treasury minister Chris Philp declined to comment on whether the Government will increase benefits in line with inflation, but said they will be “mindful” of cost-of-living pressures.

The exchanges came during a lively session of Treasury questions, in which a shout of “resign” could be heard when Mr Kwarteng approached the despatch box for the first time.

The Chancellor and his team repeatedly defended their approach and opted to use the “anti-growth coalition” attack line against opposition MPs.

But the gravest warnings came from a pair of MPs on the Conservative benches as Mr Kwarteng prepares to deliver his new fiscal plan, alongside independent economic forecasts, on October 31.

Mr Kwarteng has been under pressure for the market turmoil which erupted after the Government last month announced a £45 billion package of unfunded tax cuts alongside the commitment to cap energy bills for the next two years.

The Chancellor later dropped plans to abolish the 45% tax rate on earnings over £150,000, although remains committed to the rest of his mini-Budget.

Mr Stride, who chairs the Treasury Select Committee, welcomed the Chancellor bringing forward the medium-term fiscal plan and Office for Budget Responsibility (OBR) forecast.

He added: “But could I caution him that when it comes to the measures that he puts forward to underpin that forecast that he reaches out as much as he can across this side of the House and the other side of the House to be absolutely certain that he can get those measures through this House.

“Any failure to do so will unsettle the markets.”

Mr Kwarteng replied: “He’s absolutely right that we will and should canvass opinion widely ahead of the publication of the plan.”

Mr Kwarteng also described the independence of the OBR as “absolutely sacrosanct” after Labour’s Alison McGovern (Wirral South) accused members of the Government of briefing against it.

Mr Philp, in response to calls from SNP MP David Linden (Glasgow East) to increase benefits in line with inflation, said: “I’m not going to offer any kind of running commentary on internal discussions which are going on. I’ve said the normal, ordinary statutory process is ongoing but of course the Government is mindful of the cost-of-living pressures that people are facing.”

Mr Philp highlighted an increase in the minimum wage, adding: “There are also now more vacancies in the economy than there are people on unemployment benefits as well.”

Conservative MP Mr Smith then asked: “Could he confirm to this House that the Government will not balance the forthcoming tax cuts on the back of the poorest people in our country?”

Mr Philp replied: “I think the objective of this Government is first of all to make sure that the economy is growing, that will help lift wages, create new jobs and it will create a sustainable tax base for our public services, but as we make these decisions (Mr Smith) refers to, of course we’re going to balance considerations of fairness, the cost-of-living pressures people suffer along of course with the interests of taxpayers, who are working hard to pay tax as well.”

Conservative former minister Guy Opperman called for the Government to lead on reduction of energy in public buildings.

The MP for Hexham said: “Can I urge the Chancellor to have a nationwide mail-out campaign, coupled to Government taking the lead on the reduction of energy in all public buildings, as the Germans and other countries are doing so.

“This has the twin benefit of saving consumers and also reducing taxpayer subsidy.”

Mr Kwarteng said: “I think my honourable friend makes an excellent suggestion.

“Obviously I’m very careful not to make unfunded spending commitments on the floor of the House but his suggestion is a very well made one that we should look into.”

Ministers also faced calls from Conservative MP Laurence Robertson (Tewkesbury) to meet the Bank of England more regularly to “co-ordinate policy a little more closely”.