Tory rebels threaten to block scrapping of 45p tax rate

Kwarteng - Owen Humphreys/PA Wire
Kwarteng - Owen Humphreys/PA Wire

Tory MPs are threatening to block the abolition of the 45p tax rate as Liz Truss faces a rebellion over the mini-Budget.

Some Conservative backbenchers are furious about the measure, arguing that it is “toxic” and has come at “a high political cost for very little benefit”.

MPs have told how they are getting “shouted at in the street” about the tax cut for top earners while their inboxes are flooded with correspondence from constituents angry about the move.

Rebel Tories are preparing to vote down sections of the Finance Bill to block the abolition of the 45p rate by supporting amendments that would see it struck out, The Telegraph understands.

On Thursday morning, Ms Truss defended her mini-Budget plans, saying that as Prime Minister she was prepared to take “controversial and difficult decisions”.

During a morning round of interviews with BBC local radio stations, she insisted that “we had to take urgent action to get our economy growing”.

But this did little to quell a growing Tory revolt, spearheaded by backers of Rishi Sunak who believe their warnings about the economy have been ignored.

On Thursday night Julian Smith, a the former chief whip, became the latest MP to publicly call for the 45p tax rate cut to be shelved, saying the Government should “take responsibility” for the link between the mini-Budget last Friday and the impact on people’s mortgages.

“Frustration doesn’t come close – MPs are absolutely furious,” one ex-Cabinet minister told The Telegraph. “The 45p tax rate cut was completely unnecessary. It came at a high political cost for very little benefit.

“Mrs Thatcher would have turned in her grave if she had seen a Conservative government trying to cut taxes before they knew where the money was coming from.”

The ex-minister said any votes on tax cuts should be postponed, otherwise the Government would have a “very embarrassing defeat on their hands”.

Another senior former Cabinet minister said there was “a very serious risk the 45p does not get voted through Parliament”, adding: “For a Conservative government to put in jeopardy people’s homes and their pensions is unbelievable.

“It requires a series of proper votes in Parliament, primary legislation to change the headline rates of tax. There will be votes on the Finance Bill and specifically on 45p.”

On Thursday, the Office for Budget Responsibility, the Government’s fiscal watchdog, said it had been asked by Kwasi Kwarteng, the Chancellor, to publish a draft of its next economic forecast on Oct 7 rather than waiting until the previously agreed date of Nov 23. Treasury officials say the draft will not be made public and will be used to inform the Treasury's decisions on further measures.

It will be seen as a move to reassure MPs before the Commons returns the following week, when they will begin voting on the measures outlined in the mini-Budget.

MPs feel emboldened to vote down parts of the mini-Budget because, unlike a full Budget, the move would be likely not to be considered a vote of confidence in the government over which they would lose the whip.

The party would also struggle to recover from the embarrassment of having Tory MPs voting against a tax cut as totemic as abolishing the 45p top rate.

A third former Cabinet minister said: “The 45p rate is the bit that we’re all getting a kicking on and it’s completely overshadowed the energy intervention. The naivety and stupidity of the mini-Budget was that nobody’s talking about the energy package – that’s just not landed at all.”

He said making it a confidence motion – meaning Tory MPs would lose the whip if they voted against it – would be “risking open revolt”.

Another former minister said: “It’s exactly what a number of us warned would happen. It’s a disaster and totally self-inflicted. It feels like 1992 Black Monday again.

“There’s no way it will get through the House. The PM and Chancellor will have to do a U-turn and change policy on the tax cuts and energy bailout with a much more targeted package and hope the public don’t care about the optics, just their bills. Or else the Bank of England will have to keep putting up interest rates and trigger a massive housing crash.”

One senior backbencher pointed out that MPs would never vote against a full Budget but said that because this is a mini-Budget there would be “all sorts of jiggery pokery”. The MP, who supported Mr Sunak in the leadership contest, pointed to the “fundamental political weakness” of Ms Truss, whose support is “very shallow indeed”.

Another said that the scale of anger was “massive”, adding: “People are really annoyed – this is a completely self-inflicted crisis. We have to be the party of financial responsibility or we are nothing. It is quite possible that people will vote against the 45p tax rate – there are lots of people who have no reason to support the Government.”

A Treasury spokesman said: ''Last week the Chancellor set out the first stage of the government’s Growth Plan, with more supply side reforms to come in the next few weeks -  including announcements on changes to the planning system, business regulations, childcare, immigration, agricultural productivity, and digital infrastructure.

“And the Chancellor has commissioned the OBR to produce an economic and fiscal forecast which will be published on 23 November. He will set out the government’s Medium Term Fiscal Plan alongside this, which will build on the commitment to get debt falling as a share of GDP in the medium term.”

Additional information: As in every forecast, the content of the forecast throughout the process will evolve in order to account for new information – for example, new published statistics or any new policy decisions. It would not be appropriate to provide running updates during that process.

"The government is committed to working closely with the OBR. The Prime Minister and Chancellor are meeting with Richard Hughes tomorrow to discuss the forecast process and economic and fiscal developments since March. The Chancellor and OBR will be meeting as is usual throughout the forecast process."