Prime Minister Liz Truss Under Pressure Over Tax Cuts as Markets Continue To Crash

United Kingdom Prime Minister Liz Truss is facing pressure from Tory MPs to rewrite last month's controversial "mini" Budget as markets continue to crash.

The warnings from senior Conservative MPs came prior to Truss' appearance at a meeting of Tory backbenchers. In a statement, one loyal minister said that they were completely in a dreadful place, arguing that there was no way out.

Pressure on Liz Truss

Truss has repeatedly defended the proposed cutting of taxes that was outlined last month. The chancellor's mini-budget on Sept. 23 included $50 billion of tax cuts that were funded by borrowing. It sparked turmoil in financial markets and forced the Bank of England to intervene in the matter to protect pension funds.

Chancellor Kwasi Kwarteng is now due to set out how he will fund the package and reduce the amount of debt on Oct. 31. On the other hand, Truss has denied that she is planning public spending cuts, arguing that the government would instead focus on reducing debt "by making sure we spend public money well," as per BBC.

But Mel Stride, a prominent supporter of Truss' leadership rival Rishi Sunak, suggested that the government would have to show a "clear change of tack" in order to restore credibility with the financial markets.

Stride noted that with how clear the government's position was made public on protecting spending, there is an emerging question. This is whether or not any plan that does not include at least some element of the further row back on the tax package is actually capable of satisfying the markets.

According to the Financial Times, Tory MPs have pointed out that many business groups were not asking for the planned increase to be reversed, as many companies wanted other cuts, including to business rates.

Tax Cuts

Colleagues of Kwarteng said that the chancellor is determined to hold down corporation rates, but some Tory MPs argued that he might have to let the tax rise initially before slowly dwindling it down. Truss also acknowledged that Kwarteng's fiscal event was rushed and that the grounds for it could have been better prepared with the markets.

At the meeting, the prime minister was greeted by a traditional banging of desks but soon faced questions on rising mortgage rates and the party's plummeting poll ratings. A veteran Tory MP, Rob Halfon, accused Truss of "trashing workers' conservatism and everything the party has done over the last 10 years."

Gemma Tetlow of the Institute for Government is among many economists who questioned how Truss could cut debt in the medium term without either reversing some of her tax cuts or reining in spending.

The Institute for Fiscal Studies' Ben Zaranko said that if the chancellor is serious about making sure that debt falls, any real cuts to any part of public spending are out of the question. This means that he would have to look at reversing the tax cuts in his recent mini-Budget and/or announce new tax-raising measures.

A senior Whitehall official said that the prime minister is panicking over the situation and is reaching for almost anything that she can do to calm the markets down, Politico reported.