Liz Truss is set to back down over plans to squeeze benefits payments

Yet another U-turn! Liz Truss is set to back down over plans to squeeze benefits payments to calm warring MPs

The Prime Minister hinted that real-terms spending cuts were on the way
But Government sources suggested that the plan would be scaled back
Truss said it was not fair to ask working people to fund hike for those on benefits

Liz Truss is poised to back down on plans to squeeze benefit payments as she tries to calm her warring MPs.

The Prime Minister hinted yesterday that real-terms spending cuts were on the way in the ‘medium-term fiscal plan’ due on October 31, saying: ‘Spending will grow less rapidly than previously planned.’

But Government sources suggested the plan to raise benefits in line with earnings rather than inflation would be scaled back.

Asked directly whether the squeeze – worth up to £7 billion – would go ahead, a source said: ‘The decision to raise corporation tax means the worst pressures have come off and we will be able to avoid some of the more extreme stuff.’

Miss Truss believed the benefits squeeze was ‘defensible’, arguing it was not fair to ask working people receiving an average 5.5 per cent pay rise to fund a 10 per cent hike for people on benefits.

Liz Truss is poised to back down on plans to squeeze benefit payments as she tries to calm her warring MPs

But the plan triggered a backlash from some Tories, including Cabinet minister Penny Mordaunt, who said benefits should ‘keep pace’ with inflation.

Allies of the PM said she would now focus ‘relentlessly’ on ensuring that the Halloween economic statement restored the Government’s reputation for economic competence.

One said: ‘The main objective now is to get the fiscal plan out in two weeks and make very clear to people how we are going to balance the books.

‘The challenge and opportunity is to set out a plan that makes the numbers add up and gets economic growth going again.’

The medium-term fiscal plan, which will now be delivered by Jeremy Hunt, will set out how the Government will get debt falling within five years.

U-turns on corporation tax and the 45p top tax rate remove £20 billion of the £45 billion in tax cuts announced by Kwasi Kwarteng in last month’s emergency Budget.

But economists said last night that spending cuts of at least £20 billion – and perhaps double that – would still be needed to balance the books.

Speaking at an emergency press conference in Downing Street last night, the PM said: ‘We will do whatever is necessary to ensure debt is falling as a share of the economy in the medium term.

But the plan triggered a backlash from some Tories, including Cabinet minister Penny Mordaunt, who said benefits should ‘keep pace’ with inflation

U-turns on corporation tax and the 45p top tax rate remove £20 billion of the £45 billion in tax cuts announced by Kwasi Kwarteng in last month’s emergency Budget

‘We will control the size of the state to ensure that taxpayers’ money is always well spent. Our public sector will become more efficient to deliver world-class services for the British people. And spending will grow less rapidly than previously planned.’

Government sources said ministers would also press ahead next week with the first of a series of ‘supply-side reforms’ in areas stretching from broadband rollout and planning to employment law and childcare.

Ministers are also expected to roll out a series of policies designed to fire up the Tory base, including measures to tighten up strike laws and a crackdown on crime.

A source said: ‘We need to get back to a period of steady government, taking on the priorities of the public and making sure we deliver on them.’

Miss Truss is expected to spend much of the weekend trying to reassure ministers and senior MPs that she has a credible plan to continue. Sources said there were no plans for a Cabinet meeting until next week.

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