Truss faces fresh battle to stop Tory rebels blocking plans to squeeze benefits and cut public spending

4 October 2022, 01:23 | Updated: 4 October 2022, 08:12

Liz Truss is facing a fresh battle against Tory rebels trying to block her plans to squeeze benefits and cut public spending after being forced to abandon the abolition of the 45p top rate of tax.

Tory rebels who forced the PM into her initial u-turn, including former ministers Michael Gove and Grant Shapps, have already begun warning against the rest of her agenda, with the benefits battle appearing to be the new front for infighting.

Downing Street is said to be considering not increasing Universal Credit in line with inflation, but instead using an increase in average earnings as the metric to encourage people into work.

Some Cabinet ministers are understood to believe that refusing to increase benefits by inflation is a "non-starter", according to the Telegraph.

The Prime Minister - and Chancellor Kwasi Kwarteng - declined to commit to increasing benefits in line with inflation on Monday.

Failing to keep pace with rising prices would leave some of the poorest households facing a real-terms cut in their incomes.

Listen to Nick Ferrari's interview with Liz Truss this morning only on Global Player.

Former Home Secretary Priti Patel is also set to fire a warning shot at Liz Truss on Tuesday, saying the Tory party will "live or die" by its economic credibility.

In a sign of continuing disquiet among Conservative MPs, Ms Patel is set to accuse Ms Truss and Mr Kwarteng of "spending today with no thought of tomorrow".

"I want to see our party regain its credibility by restoring its commitment to sustainable public spending ... which is affordable today, tomorrow and for the foreseeable future," she will tell a conference fringe event, according to The Times.

It comes after Mr Kwarteng admitted his mini budget caused "a little turbulence", after over a week of economic turmoil sparked by his fiscal plan.

Last week the pound plummeted to a record low and lenders pulled mortgages from the market after his plan, which included scrapping the bankers' bonus cap and the top level of tax - the latter of which the government U-turned on 10 days later.

Opening his speech to the Conservative Party conference hours after the change on Monday, Mr Kwarteng said: "What a day.

"It has been tough but we need to focus on the job in hand."

He went on: "I can be frank."I know the plan put forward only 10 days ago has caused a little turbulence.

"I get it. I get it. We are listening and have listened, and now I want to focus on delivering the major parts of our growth package."

Read more: Nadine Dorries calls for a general election and accuses Liz Truss of not having a mandate for her policies
Read more: 'What a day': Chancellor admits mini Budget caused 'a little turbulence' after govt U-turn on 45p tax plan

The Chancellor is now expected to bring forward his plans for bringing down government debt.

In a second change of course in a bid to reassure markets and Tory rebels, the Chancellor is understood to be bringing forward his medium-term fiscal plan, alongside official forecasts from the Office for Budget Responsibility, to later this month.

Having previously insisted he would wait until November 23, Mr Kwarteng told the conference he would publish details "shortly" on how he planned to bring down public debt as a percentage of GDP over the medium term.

He insisted the Tories will be "serious custodians of the public finances".